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Registration of “Partnership Firm ”

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“Opportunities increase when you help others win. A little win for a partner is a little win for you”

We all are aware with a known fact that a proprietorship form of business is faced with many limitations. The amout of money that can be invested in the business, the skills and strategic thinking that a businessman can devote into the business are some limitations which a proprietary concern faces.

As such, sole proprietory businesses are usually small. Partnership form of business removes these limitations and hence allows the business to grow further.

A Partnership firm plays a vital role in the success of new ventures. The partnership is formed with the motive of profit sharing, along with shared losses or uncertainty.


“Partnership is a contract between two or more like-minded persons that have mutually decided to share the profits and losses by conducting a lawful business”.

What is a Partnership firm?

A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests.

As per the legislative provisions, Partnership is “an agreement between persons who have agreed to share profits of the business carried on by all or any one of them acting for all.”

In simple terms, A partnership firm is created by two or more persons who comes together to join their resources for mutual benefits by sharing profits and losses in the prescribed ratio.However A partnership firm unlike registered companies is not a separate legal entity from its member.

Features of Partnership Firm

Partnership is a contract between two or more like-minded persons who have mutually decided to share the profits and losses for conducting a lawful business.

  1. A partnership firm can be established with just 2 members (the maximum limit for number of members is 100).
  2. The formation and dissolution of partnership firm is very easy.
  3. The profits are distributed among the partners as per the partnership deed.
  4. The compliance requirement in the partnership business is also very less.
  5. There is no minimum prescribed capital in case of a Partnership Firm.
  6. There is a flexibility and scope of expanded vision in decision making in the partnership business.
  7. There is no compulsion on the part of partnership firm to get register their firm.

All about Partnership Deed

Although it is permissible to have oral partnership, but it is preferable that a Deed of Partnership should be made in writing to avoid any conflict between the partners in the future. Moreover To obtain subsequent regsitrations and approvals like PAN, TAN, GSTIN, EPFO Code etc. There must be some identity document and that’s the place where partnership agreement is crucially needed.

  • This deed should clearly specify following details;
    A. name of the partnership firm, the names of the partners,
    B. the capital to be contributed by each partner, the profit or loss sharing ratio between partners,
    C. the business of the partnership, the duties, rights, powers and obligations of each partner and other relevant details.
  • This partnership deed must be made on paper which is duly stamped as per the laws prevalent at the place of execution. 
  • It must be signed by all partners and witnessed by independent persons.


“With the expansion of business, it became necessary for a group of person to join hands together and supply necessary capital and skill. A person may possess exceptional business ability but no capital; he can have a financing partner”.


Registration of partnership firm

A partnership firm may be registered at any time (not merely at the time of its formation but can obtain registration subsequently also) by filing an application with Registrar of firms of the area in which any place of business of the firm is situated or proposed to be situated.

However, the registration is not compulsory for partnership firm and therefore, there are no penalties for not taking registration in partnership business.It is optional for partners to obtain registration.

But, it is advisable to take registration because it brings many advantages to the firm.

Benefits of Obtaining Registration

The major benefit as well as reason for partnership firm registeration are as follows:

  1. It serves as a identity document of partnership firm. 
  2. It becomes easier to approach the court in case of dispute between co-partners or between partners and firm for the resolving the same.
  3. It becomes easier to file a dispute against the third party.
  4. A registered partnership firm have a power to claim set-off (i.e. if any third party sues the firm to recover a sum of money then a registered firm can claim for its own outstanding or counter the claim on some other reasonable ground whch is not possible without a well decorated partnership deed duly registered.)

 Disadvantages For Not Obtaning Registration

  1. All partners are individually and wholly liable for the debts of the partnership firm, it simply means that all the partners bind each other by their official acts and are liable for each other’s acts. 
  2. The partners of unregistered partnership firm cannot file a case in a court against the firm or other Co-partners.

    However, a criminal proceeding can be brought by a partner of an unregistered firm against the other co-partner.

  3. A unregistered firm cannot file a case in court against any third party.
  4. The power to claim set off is also not available to a unregistered firm.

Process to Form a Partnership Firm

  1. Execution of partnership deed and its registration with the registrar of firms.
  2. Apply for PAN and TAN of the firm. 
  3. Open Current Bank Account in the name partnership firm.
  4. Apply for GST registration, (if required).
  5. Apply for MSME registration, if desired by the firm.

Documents required for formation of partnership firm

  1. Attested Partnership deed.
  2. Address proof of the registered office of the firm (if rented – rent agreement and NOC from landlord).
  3. Identity and Address proof of all the partners in the firm (preferably PAN and AADHAR).
  4. Photographs of all partners.
  5. An affidavit signed by all the partners certifying that all the details are true is required if partnership firm is getting registered.