CA Desk

Partnership Firm

A Partnership firm is a business entity created by persons who have agreed to share profits or loss of the business. Partnerships are a very good choice of business entity for small enterprises wherein two or more persons decides to contribute to a business and share the profits or losses. In India, Partnerships are widely prevalent because of its ease of formation and minimal regulatory compliance. Also, the concept of LLP was introduced only in 2010, whereas the Partnership Act, 1932 has been in existence before the independence of India. Hence, partnership firms are the most prevalent type of business entity wherein a group of people are involved.

    How To Draft A Partnership Deed Using CADesk India

    Registering your partnership firm online is now a very easy task! Start drafting your partnership deed in just three easy steps.

    Reach out to our experts

    Our business experts can resolve all your doubts regarding the process. Subsequently provide all the required information

    Get your first draft

    Our team will submit
    the first partnership
    deed draft in just
    4 days.

    Free iterations

    In case of any changes,
    reach out to us.
    We provide two free rounds of
    iterations.

    Reach out to our experts

    Our business experts can resolve all your doubts regarding the process. Subsequently provide all the required information

    Get your first draft

    Our team will
    submit the
    first partnership
    deed draft
    in just
    4 days.

    Free iterations

    In case of any
    changes, reach
    out to us.
    We provide
    two
    free rounds of
    iterations.

    Types of Partnership

    There are two types of Partnership, registered Partnership and unregistered Partnership. In terms of the Indian Partnership Act, 1932, (Act), the only criterion to commence business as a partnership is the finalization and execution of a Partnership Deed between the Partners. The Act does not require the Partnership Deed/Partnership Firm to be registered and in other words, does not require the Partnership Firm to be a registered Firm. Therefore various partnership businesses exist as an unregistered firm.

    There are no penalties for non-registration of a partnership firm, and a partnership firm can even be registered after formation. However, unregistered partnership firms have certain rights denied in Section 69 of the Partnership Act, which deals with the effects of non-registration of a partnership firm. Some of the disadvantages of an unregistered firm are: 

    Partner

    A partner of an unregistered firm cannot file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act.

    Enforce a Right

    No suit to enforce a right arising
    from an agreement can be
    instituted in any Court by or on
    behalf of a firm against any
    third party unless the firm is registered.

    Clam Set-off

    An unregistered firm or
    any of its partners cannot
    claim set-off or other
    proceedings in a
    dispute with a third party.

    Difference between LLP & Partnership

    Cost

    The cost for registration of LLP is normally higher than the cost for registration of a partnership firm.

    Authority

    LLPs are registered in India under the Ministry of Corporate Affairs, Central Government. Partnership firms are registered with the Registrar of Firms, Controlled by the respective State Government in which the firm is registered.

    Limited Liability Protection

    The main advantage of a Limited Liability Partnership over a traditional partnership firm is that in an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence. An LLP also provides limited liability protection for the owners from the debts of the LLP. However, unlike private limited company shareholder, the partners of an LLP have the right to manage the business directly.

    Number of Partners

    LLPs and Partnership Firms must have a minimum of two partners to be registered. Post incorporation, an LLP can have unlimited partners. In case of a Partnership Firm, if the number of partners at any time reduces below the mandatory minimum of 2 due to death, incapacitation or resignation of a Partner, the partnership firm would stand dissolved. On the other hand, in case of an LLP, if the number of Partners reduces below 2, the sole Partner can still find a new Partner to fill the position without dissolution of the LLP.

    Registration of Partnership Firm

    A partnership firm can be registered under Section 58 of the Indian Partnership Act at any time, even subsequent to the formation. The registration of a partnership firm is done through the Registrar of Firm in which the partnership firm is situated. When the Registrar of Firms is satisfied that the provisions of Section 58 are complied with, a record of entry of the statement is made in the Register of Firms and Certificate of Registration is issued.

    Documents Required for Registration of
    Partnership Firm

    The application for registration of Partnership Firm must contain the prescribed registration form for incorporation of a company, identity proof/address proof of Partners, certified a true copy of the Partnership deed entered into and proof of the principal place of business.

    As identity and address proof of the Partners, any of the following two documents can be submitted:

    Pan Card

    Pan Card

    Passport

    Passport

    Driver License

    Driver License

    Aadhaar Card

    Aadhaar Card

    Votrs ID

    Voters ID

    Proof of the principal place of business can be established by submitting the following documents:

    Sale Deed

    Sale deed in case one of the Partner owns the place of business

    Rental agreement

    Rental agreement copy if the premises are rented

    Copy of Bills

    Copy of latest electricity bill or water bill or property tax receipt

    CA Desk is a team of highly professional CA, CS, Lawyers who driving towards the integration of technology with traditional practices to cater to the need of MSMEs in the fast-moving and cost-effective world.

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