Online Partnership Firm Registration

A partnership is an alliance of two or more persons who agree to combine their financial resources and managerial abilities to run a business and share profits/losses in an agreed ratio. The persons who have agreed to join in partnership are individually called “Partners” and collectively a ‘Firm’. A partnership firm can be formed with a minimum of 2 (two) partners, and it can have a maximum of 50 partners.

Partnership firms in India can be divided into two categories, namely, registered partnership or unregistered partnership. Registered partnership firms are those firms having a registration certificate from the Registrar of Firms. All other partnerships that do not have a registration certificate would be classified as unregistered partnership firms. After the introduction of Limited Liability Partnership (LLP), general partnership firm has turned out to be a less favourable option by the businesses due to unlimited liability of partners, non-transferability of partnership and absence of central authority, etc. However, easier formation, low costs of registration and compliance, and minimal compliance make it a sensible option for some businesses that have minimal debt requirements.

• Registration

The registration of a partnership firm is optional and not compulsory under the Indian Partnership Act. However, it is always advisable to register the partnership firm, as a registered firm enjoys certain special rights and benefits as compared to the unregistered firms.

• Lawful Business

A partnership firm can be formed only on the basis of a lawful business activity. Its business may include any trade, industry or profession. It can engage in any activity such as production and/or distribution of goods and services with a view to earning profits.

• Agreement

Partnership is formed on the basis of an agreement between two or more persons to carry on business. The terms and conditions of partnership are laid down in a document known as Partnership Deed.

• Sharing of profits and losses

In a partnership firm, partners are entitled to share in the profits and are also to bear the losses, if any at an agreed ratio.

• Unlimited Liability

The liability of partners is unlimited as in the case of a sole proprietorship. In case some obligation arises, then not only the partnership assets but also the private property of the partners can be used to pay off the debts of the partnership firm.

• Restriction on transferability of interest

: No partner can transfer his interest in the partnership to any other person. He may, however, do so with the consent of all other partners.

• Continuity

A partnership comes to an end if any partner dies, retires or becomes insolvent. However, if the remaining partners agree to work together under the original firm’s name, the firm will not be dissolved and will continue its business after settling the claim of the outgoing partner.

• Taxation

Every Partnership Firm has to pay taxes on its profit and in order to avoid double taxation, the partners are not required to pay tax on the share profit they receive from Partnership Firm.