Partnership Firm

A Partnership Firm is a prevalent type of business constitution for organizations that are owned, managed and controlled by an Association of People for benefit. Organization firms are moderately simple to begin are is predominant among small and medium organizations in unorganized sectors. With Limited Liability Partnerships in India, Partnership Firms are quick losing their pervasiveness because of the additional favorable circumstances offered by a Limited Liability Partnership.

It isn't mandatory to register a Partnership firm; but it is advised because of the additional advantages. Organization firms are made by drafting a Partnership deed among the Partners.

Documents Required for Partnership Registration
  • 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
FAQ

A minimum of two Persons is required to start a Partnership firm. A maximum number of 20 Partners are allowed in a Partnership firm.

The Partner must be an Indian citizen and a Resident of India. Non-Resident Indians and Persons of Indian Origin can only invest in a Proprietorship with prior approval of the Government of India.

There is no limit on the minimum capital for starting a Partnership firm. Therefore, a Partnership firm can be started with any amount of minimum capital.

Only a registered Partnership firm can 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. Also, only a Registered Partnership firm can claim a set off (i.e. mutual adjustment of debts owned by the disputant parties to one another) or other proceedings in a dispute with a third party. Hence, it is advisable for Partnership firms to get itself registered sooner or later.

Yes, there are procedures for converting a Partnership business into a Company or a LLP at a later date. However, the procedures to convert a Partnership firm into a Company or LLP are cumbersome, expensive and time-consuming. Therefore, it is wise for many entrepreneurs to consider and start a LLP or Company instead of a Partnership firm.