What is Partnership?
Most of the businesses in India adopt a partnership business, so to monitor and govern such partnership The Indian Partnership Act was established on the 1st October 1932. The relation between persons who have agreed to share the profits of a business carried on by all of them or any one of them acting for all is called partnership. Low costs, ease of setting up and minimal compliance requirements make it a sensible option for some businesses while some consider LLP as a better option. All it needs is a partnership deed that does not even need to be registered. A good option for home-based businesses, particularly while starting out.
Essential Facts On Partnership
- Partnership firm:
The relation between persons who have agreed to share the profits of a business carried on by all of them or any one of them acting for all is called partnership.
- No separate entity:
Partners and partnership firm both are same, which means in a partnership firm partners do not have separate legal entity from the firm.
- Maximum number of partners:
Minimum 2 partners are necessary to start a partnership firm. Maximum limit for the number of partners is 50. The same is different for those partnerships involved in banking business.
- No necessary registration:
In a partnership, registering the firm is not compulsory. Only a partnership deed is sufficient to start the firm, that is mutually agreed by all the partners. But non registration has its disadvantages.
- Mutual agency
This is the essence of partnership. The partners are the owners as well as the agent of their firm. Any act performed by one partner can affect other partners and the firm. It can be concluded that this point acts as a test of partnership for all the partners.
Documents Required To Register a Partnership Firm
- Form No. 1 (Application for registration under Partnership Act).
- Original copy of Partnership Deed, signed by all partners.
- Affidavit declaring intention to become partner.
- Rental or lease agreement of the property/campus on which the business is set.
Benefits of a Partnership
- Easy Formation – An agreement can be made oral or printed as an agreement to enter as a partner and establish a firm. Only a partnership deed is essential to run a partnership business.
- Large Resources – Unlike sole proprietor where every contribution is made by one person, in partnership, partners of the firm can contribute more capital and other resources as required.
- Flexibility – The partners can initiate any changes if they think it is required to meet the desired result or change circumstances.
- Sharing Risk – All loss incurred by the firm is equally distributed amongst each partner.
What We Do For You
- We study your business requirements.
- We prepare the first draft and share with you within 4 working days.
- We do up to two rounds of iterations, if necessary, at no extra cost.
How much time does it take to register a partnership?
The registration of Partnership Firm in India can take up to 12 to 14 working days. However, the time taken to issue a certificate of incorporation may vary as per the regulations of the concerned state. The registration of Partnership Firm is subject to Government processing time which varies for each State.
What is the scope of liability when it comes to partnerships?
Every partner is jointly liable with all the other partners and also individually, for all acts/activities of the firm, during the course of business while he/she is a partner. This means that if a loss or injury is caused to any third party or a penalty is levied during the course of business all partners will be held liable even if the injury or loss was caused by one of the partners.
If all partners wish to end the partnership, how can they do so?
If the partners of a firm wish to end the partnership, they can do so by dissolving the partnership by notice, if it is a partnership of will. A partnership can be dissolved in accordance with the terms laid out in the Partnership Deed, or they can do so creating a separate agreement.25px