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Many people easily get confused when it comes to technicalities in the business world. As Henry Ford said “paying attention to simple little things that most men neglect makes few men rich”. Talking about business and complexities we will try to breakdown Partnership under Company legislature and its advantages to you.


What is the partnership?


 In India, the partnership act is governed under section 4 partnership act. It exemplifies it as “An agreement between two or more people who have agreed to share profits and losses of the business carried on by all or one of them acting for each other”


A Company is formed through registration under the comPANies act or incorporation in pursuance of an Act of the legislature. A partnership, on the other hand, an association of persons based on mutual agreement among them and is not compulsorily required to be registered under the act.


What are the different types of partnership?

  1. General partnership(GP)
  2. Limited Partnership(LP)
  3. Limited liability partnership(LLP)
  4. Limited liability limited partnership(LLLP)


The two most general forms of partnership are General partnership and Limited partnership.


There are three essential elements to a General Partnership i.e.


  1. Sharing of profits and losses.
  2. Joint ownership of the business.
  3. An equal right in the management of the business.


Coming towards the Limited partnership


In a limited partnership, there is one general partner and one or more (depending on the type of firm) limited partners. Usually, the general partner has the responsibility of the management of the business and the limited partner contributes to the assets of the business, having no role in the responsibility.


What are the advantages of a partnership firm registration in India?


  1. Businesses registered under the act do not have to pay income taxes as each partner files the profits as well as the losses on his/her own PERSONAL MATTERS income tax return. This is a great advantage as this way businesses do not get taxed separately.
  2. Under the law partnership is very easy to establish, it requires minimum paperwork legally.
  3. When the business exPANds and is in need of extra funds, under partnership act they have an ability to easily generate funds as there is more than one owner i.e. it reduces the risk repayment of funds and due to that more trust can be there.
  4. Since there are more than one owner the skill, management and knowledge quotient increases. A business decision can be more accurate and well thought if there are more people on the board.
  5. If there is a limited partnership it leads to decrease in liability on the partners with respect to potential lawsuits and money. Each and every partner is limited to the amount of capital it brings in hence reducing the chances of bankruptcy.
  6. Limited partners get to share in the profits and losses without having to participate in the business itself.
  7. A business creditor cannot come after the assets of a limited partner as they are limited to the capital they bought in.


Despite having various advantages partnership Company registration does have some disadvantages too like a partner cannot transfer interest in the business without the unanimous consent of the other partners. Partnerships Company registrations in India can potentially be unstable because of the danger of dissolution if one partner wants to withdraw from the firm.


But as we can see above the pros outweigh the cons. In today’s scenario where capital with everyone is limited partnership is a great way to start the business.

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FAQ - Frequently asked questions

What Is A Partnership Firm?

A partnership firm is a business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Deed that may or may not be registered. In such a business, the members are individually partners and share the liabilities as well as profits of the firm in a predetermined ratio.

Is A Partnership Firm A Separate Entity?

The partners in a partnership firm are the owners, and thus, are not a separate entity from the firm. Any legal issues or debt incurred by the firm is the responsibility of its owners, the partners.

What Are The Main Aspects Of A Partnership Deed?

The deed should contain names of the partners and their addresses, the partnership name, the date of commencement of operation of the firm, any capital invested by each partner, the type of partnership and profit-sharing matrix, rules and regulations to be followed for intake of partners or removal.

Why should Partnership Firm go for registration?

Partnership firms are governed by the Indian Partnership Act, 1932. Under the act, registration is not mandatory but it is advisable due to following reasons: Partner(s) can’t file a case in any court against the firm/ other partners unless firm is registered. The unregistered firm or its partners can’t file a case against third party on breach of a contract but the third party can file a case In case of a dispute with a third party, the unregistered firm or any of its partners cannot claim a set off

When should we apply for registration of our partnership firm?

A partnership firm can be registered whether at the time of its formation or even subsequently. The application for registration is to be made to the registrar of firms of the region in which the business is situated. It is advisable to get the firm registered as soon as it starts its business to avail the rights that can be enjoyed only by a registered firm.

Is there any guideline on choosing a name for the firm?

The name of a partnership firm should not contain any words which indicate the approval/support of the government other than a case where the government has given its written consent for the use of such words as part of the firm’s name. Key pointers: The names must not be too identical or similar to the name of another existing firm doing similar business. The name must not contain words like Crown, Emperor, Empress, Empire or any other word indicating government approval.

What will be the government fee for firm registration?

The government fees applicable varies from state to state based on partner contribution. In most states the fee falls in range of Rs.1000-1500 along with stamp duty. Our experts will guide you on this. You will be charged only on actual government fees.