Partnership Firms are one of the most common business structures in India and Governed by The Indian Partnership Act 1932. In partnership a group of persons are involved and manage the business and all together are responsible for Profits and Losses of the business.
Deed of partnership is the key element in any partnership firm. By virtue of Partnership Act, a partnership can be incorporated with oral deed but in today’s scenario there is no place for Oral Partnership deeds and one must get the deed of Partnership drafted.
Registration of partnership firms are not compulsory, a partnership firm could be Registered with Registrar of Firms or it could be Unregistered, but both are valid as per law. Registration of Partnership firm is District wise in India.
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Documents Required for Partnership
- Pan and Aadhar Cards of all the partners
- Passport size photographs of all the partners
- Address proof of place of business (Rent deed / Electricity Bill or Registry Copy / NOC)
- Name of Firm
- Activity details to be performed
- Profit and Loss sharing ratio
- Amount or Ratio of Capital Contribution
Advantages of Partnership
Easy to start: A partnership firm can be incorporated in minutes; the bare requirement is 2 partners willing to perform same activity together.
Fund generation: In compare to Proprietorship firms, Partnership firms can generate more funds if required and can add more partners to contribute the funds or can introduce additional money either fresh capital of as a partner’s loan.
Less Compliance: In compare to LLP’s and Companies compliance part is minimal under partnership firm.
Difference between Registered and Un-Registered Partnership Firm
|Particulars||Registered Partnership Firm||Un-Registered Partnership Firm|
|Provision of Indian Partnership Act 1932 (referred as “ACT”)||The provisions of Indian Partnership Act 1932 apply.||The provisions of Indian Partnership Act 1932 do not apply.|
|Trustworthiness and reliable||Higher and Reliable||Lower and Un-reliable|
|Power to suit to file case against Third Parties||Can file suit against third parties.||Can’t file suit against third parties.|
|Ability to claim set off||The registered Partnership Firm claim the set-off, if any against the claim of third Party.||The power to claim set off against the third party is available only when the firm is registered under The Partnership Act 1932.|
|Conversion into LLP & Private company||Registered Partnership Firm can easily convert into LLP & Private company.||Unregistered Partnership Firm has to register first and then converts into LLP or Private company.|
Frequently Asked Questions
What is a Partnership?
What are the necessary elements that are required to form a partnership?
- There must be an agreement between two or more persons.
- The agreement must be to share the profits of the business.
- All partners together, or any one, on behalf of the others must carry on the business.
I am not a citizen of India. Can I be a partner in an Indian firm?
What is the capital of a partnership firm?
Is a deed of partnership necessary?
Who can be partners?
I have a minor son. Can he be a partner in my partnership firm?
Can a minor admitted to the benefits of partnership, become a partner on attaining majority?
I am a partner in a firm. What are my rights?
- To take part in the business.
- To share the profit or loss of the business.
- To inspect and make copies of the books of the firm.
- To receive remuneration for taking part in the business if specified in the partnership deed.
- To receive interest on capital if specified in the partnership deed.
What are my duties as a partner in a firm?
- carry on the business.
- be just and faithful to each partner.
- disclose true accounts of the firm.
- furnish full information of all things affecting the firm.
What are my limitations as a partner?
- Submit a dispute relating to the business to arbitration.
- Open a bank account on behalf of the firm in your own name.
- Compromise or relinquish any claim or portion of a claim of the firm.
- Withdraw a suit or proceeding filed on behalf of the firm.
- Enter into partnership with an outsider on behalf of the firm.
- Acquire or transfer immovable property belonging to the firm.
- Admit any liability in a suit or proceeding against the firm.
What is Partnership at will?
What are the requirements for registration of a partnership firm?
- Name of the partnership firm.
- Place of business of the firm.
- Names of any other places where the firm carries on business.
- Date of joining of each partner.
- Name and permanent address of the partners.
- Duration of the firm.The statement must be signed by all partners or by their agents specially authorised in this behalf.
I am a partner of a firm. I have been served a notice. What are its implications?
Can a partner transfer his right in the business of the firm to an outsider?
Can a new partner be admitted into the partnership firm?
Can a partner nominate a successor?
What are the ways by which partnership can be dissolved?
- By agreement.
- By compulsory dissolution.
- On the happenings of certain events.
What is dissolution of partnership by consent?
What is dissolution by agreement?
When can a partnership firm be compulsorily dissolved?
- When all the partners are declared insolvent.
- When all the partners but one as insolvent.
- When the business becomes illegal due to changes in laws.
- The firm is compulsorily dissolved even when the business is lawful but carrying it under the partnership becomes unlawful.
What is meant by dissolution on happening of certain events?
- If the firm has been constituted for a fixed period then on the expiry of that period.
- If the firm has been constituted for one or more project, then on the completion of that project.
- On the death of the partner.
- On the declaration of a partner as insolvent.
What is meant by dissolution by notice?
When is a partnership dissolved by court?
- When one of the partners becomes insane.
- When one of the partner is permanently incapable of performing his duties due to illness. 3. When a partner is guilty of misconduct, which is harmful to the business.
- If a partner frequently breaks the rules of the firm.
- When a partner transfers his interest in the firm to a third party without the consent of other partners.
- When the business of the firm incurs repeated losses.
- On any other ground which the court deems fit.
Is a public notice necessary for the dissolution of the firm?
- Deceased partner
- Insolvent partner
- Partner who is not known to be a partner and who has retired.