Difference Between LLP and Sole Proprietorship

Introduction 

When starting a new business it is important to choose the most appropriate structure for their venture. Two popular structures include LLPs and Sole Proprietorship where LLPs are considered as a separate legal entity and the sole proprietor & the business considered as a single entity. Each business structure has its own specific advantages and unique features. This blog will provide you a detailed comparison of the two structures - LLP vs Sole Proprietorship 

What is an LLP? 

A limited Liability Partnership registration is a separate legal entity which can enter into agreement with a third party under its own name. LLP has perpetual succession which means it continues to run in the event of the death of a partner. The partners have limited liability which means their liability is only limited to the capital contributed by them. In case of any debt or liability of an LLP, partners of LLP don’t need to pay from their personal assets.

What is a Sole Proprietorship? 

A sole proprietor business includes only one person who exercises complete control over its functioning and could exist as long as its sole owner exists. Sole Proprietorship Firm Registration in India is one of the most common forms of business which is adopted by many business owners who run retail shops, traders, wholesalers, MSME manufacturers, etc. Sole proprietorship is the most affordable and less compliance-intensive compared to other forms of business registrations.

Difference Between LLP and Sole Proprietorship 

Following is the detailed table of difference between LLP and Sole Proprietorship: 

Conclusion 

There is a lot of difference between a LLP and sole proprietorship so it is advised to carefully understand the difference between LLP and sole proprietorship. Where LLPs have a lot of compliances, sole proprietorship include minimal or less compliances as compared to LLP. On the other hand, LLPs are perpetual and can be continued even after the death of the owner while sole proprietorships come to an end if the owner retires or dies. In simple words both the structures have their own benefits and drawbacks. 

Frequently Asked Questions (FAQs)

1) What is the difference between LLP and sole proprietorship on the basis of Ownership?

The LLP is owned by its partners whereas sole proprietorship is owned by a single individual. 

2) Can a Sole proprietorship continue if the owner dies? 

No, if the owner of sole proprietorship dies, it will come to an end while the LLP can continue if any partner dies. 

3) Is LLP a Sole Proprietorship? 

No, an LLP is not a sole proprietorship. A LLP is owned by its partners while a sole proprietorship is owned by the owner only. 

4) What is the difference in profit distribution in an LLP or Sole Proprietorship?

The profit is distributed among the partners in an LLP while the proprietor solemnly enjoys the profit in sole proprietorship.