Introduction
In the Indian business landscape, entrepreneurs have various options for structuring their ventures. Two popular choices are the traditional partnership firm ("Partnership Firm") and the more recent concept of the Limited Liability Partnership ("LLP"). While both structures involve two or more individuals collaborating to carry on a business and share profits, they differ significantly in their legal framework, liability of partners, and operational aspects.

Governing Act and Legal Framework
Partnership: Traditional partnerships in India are governed by the Indian Partnership Act, 1932 ("IPA"). IPA lays down the fundamental principles relating to the formation, rights, duties, and dissolution of partnership firms.
Limited Liability Partnership (LLP): LLPs, on the other hand, are governed by the Limited Liability Partnership Act, 2008 ("LLPA"). LLPA was enacted to introduce a business structure that combines the advantages of a company and a traditional partnership, offering limited liability to its partners.

Legal Entity Status
Partnership: A traditional Partnership Firm, under Indian law, does not have a separate legal entity distinct from its partners. This means that the Partnership Firm and its partners are considered one and the same in the eyes of the law. Consequently, the partners are directly liable for the Partnership Firm's debts and obligations. The Partnership Firm cannot own property in its own name, and legal proceedings are usually initiated against the partners collectively or individually.
Limited Liability Partnership: An LLP is recognized as a separate legal entity, distinct from its partners. This crucial distinction implies that the LLP can own assets, enter into contracts, and sue or be sued in its own name. The existence of the LLP is independent of its partners, providing perpetual succession. Changes in partners do not affect the LLP's continuity.

Liability of Partners
Partnership: In a Partnership Firm, the partners have unlimited liability. This signifies that each partner is jointly and severally liable for all the debts and obligations of the Partnership Firm. If the Partnership Firm's assets are insufficient to cover its liabilities, the personal assets of the partners can be attached and used to settle these debts. This unlimited liability is a significant risk for partners in a traditional partnership.
Limited Liability Partnership: The hallmark of an LLP is the limited liability of its partners. The liability of each partner is generally limited to the extent of their agreed contribution to the LLP. This means that the personal assets of the partners are protected from the business debts of the LLP. However, it's important to note that a partner can still be held liable for their own wrongful acts or omissions, but not for the wrongful acts of other partners. Furthermore, in cases of fraud or where the partner acted with wrongful intent, the limitation of liability may not apply.

Number of Partners
Partnership: IPA initially did not specify a maximum number of partners. However, with the introduction of Section 464 of the Companies Act, 2013, the Central Government is empowered to prescribe the maximum number of partners in a Partnership Firm, with a ceiling of 100 (Hundred). Currently, the Companies (Miscellaneous) Rules, 2014, has prescribed the maximum number of partners in a partnership firm to be 50 (Fifty).
* **Limited Liability Partnership (LLP): The LLPA stipulates a minimum of 2 (Two) partners to form an LLP. However, there is no upper limit on the maximum number of partners that an LLP can have. This flexibility can be advantageous for businesses looking to expand their partner base without the constraints faced by traditional partnerships.

Registration
Partnership: The registration of a Partnership Firm under IPA, is not mandatory. However, registration is advisable as it provides certain benefits, such as the ability for the firm to sue third parties. An unregistered firm may face certain disabilities under the Act. The registration process involves submitting a partnership deed to the Registrar of Firms.
Limited Liability Partnership: The registration of an LLP, under the LLPA, is mandatory. An LLP comes into existence only after it is registered with the Registrar of Companies ("ROC"). The registration process involves obtaining Designated Partner Identification Numbers ("DPINs") and Digital Signature Certificates ("DSCs") for the designated partners, reserving the name of the LLP, and filing incorporation documents.

Management and Decision Making
Partnership: In a traditional partnership, unless otherwise agreed in the partnership deed, all partners have an equal right to participate in the management and conduct of the business. Decisions are typically made with the consent of all or a majority of the partners, as outlined in the partnership deed. There is a mutual agency relationship, where each partner is both an agent of the firm and the other partners.
Limited Liability Partnership: LLPs offer greater flexibility in their management structure. The LLP Agreement defines the roles, responsibilities, and powers of the partners. LLPs are required to have at least two designated partners, who are responsible for compliance with legal requirements and other statutory obligations. The partners in an LLP act as agents of the LLP itself, but not of the other partners, limiting the concept of mutual agency.

Compliance and Regulatory Requirements
Partnership: Traditional partnership firms generally have minimal regulatory and compliance requirements. They are not required to file annual returns with the Registrar of Firms. However, they are subject to income tax regulations, and their accounts may need to be audited under certain conditions as per the Income Tax Act, 1961.
Limited Liability Partnership (LLP): LLPs have more regulatory compliance requirements compared to traditional partnerships, although generally less than private limited companies. LLPs are required to file an annual return and a statement of accounts and solvency with the Registrar of Companies annually. Their accounts must be audited if their turnover exceeds INR 40,00,000/- (Indian Rupees Forty Lakh Only) or their total contribution exceeds INR 25,00,000/- (Indian Rupees Twenty Five Lakh Only) in a financial year.

Taxation
Partnership: For taxation purposes, a Partnership Firm is a separate assessment entity. The Partnership Firm is taxed on its profits, and the partners are also taxed on the interest, salary, bonus, commission, or remuneration received from the Partnership Firm.
Limited Liability Partnership: LLPs are taxed similar to partnership firms. The LLP itself is taxed on its income. However, the partners are generally not taxed again on their share of the profits. This avoids the double taxation that can occur with companies.

Perpetual Succession
Partnership: A Partnership Firm generally does not have perpetual succession. The Partnership Firm's existence can be affected by the death, retirement, insolvency, or expulsion of a partner, potentially leading to the dissolution of the Partnership Firm unless there is an agreement to the contrary.
Limited Liability Partnership: An LLP has perpetual succession. Its existence continues irrespective of changes in its partners. The death, retirement, or insolvency of a partner does not necessarily lead to the dissolution of the LLP.

Dissolution
Partnership: A Partnership Firm can be dissolved through various ways, including agreement among partners, compulsory dissolution (e.g., insolvency of all partners), dissolution by the Hon'ble Court, or on the happening of certain contingencies as specified in the partnership deed.
Limited Liability Partnership: The dissolution of an LLP is a more structured process, similar to that of a company. It can be done voluntarily or by an order of the National Company Law Tribunal ("NCLT").

Summary of Key Differences
Features Partnership Firm Limited Liability Partnership
Governing Act Indian Partnership Act, 1932 Limited Liability Partnership Act, 2008
Legal Entity Not a separate legal entity Separate legal entity
Liability of Partners Unlimited Limited to the extent of contribution
Maximum Number of Partners Generally 50 No limit
Registration Optional Mandatory
Management All partners have equal rights (unless agreed) Flexible, through designated partners
Compliance Minimal More than partnership, less than company
Perpetual Succession Generally no Yes

Conclusion
The choice between a traditional partnership and a Limited Liability Partnership depends on the specific needs and priorities of the business and its partners. If the primary concern is simplicity of formation and operation with a smaller number of partners who are comfortable with unlimited liability, a traditional partnership might suffice. However, if the partners seek the protection of limited liability, a separate legal entity status, and greater flexibility in management and partner structure, an LLP is generally a more suitable option. The LLP structure has gained significant popularity in India, especially among professionals and small to medium-sized enterprises, due to its ability to combine the benefits of a corporate structure with the flexibility of a partnership. Understanding the nuances of both structures under Indian law is crucial for making an informed decision that aligns with the long-term goals and risk appetite of the business and its stakeholders.

Disclaimer: The above article solely remits information and discusses relevant issues, it shall in no way be used for soliciting legal solutions. The information and/or observations contained in this article do not constitute legal advice and should not be acted upon in any specific situation without appropriate legal advice.