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A general partnership is a business structure wherein two or more persons come together to own and manage a business. The foundation of such a partnership lies in the Partnership deed that incorporates the terms of conducting the partnership business.
The partnership deed details the partner’s responsibilities, ownership interests, profit and loss sharing ratio among partners, nature of business, dispute settlement, dissolution process etc.
A general partnership must have a minimum of two partners. A partnership engaged in banking business can have a maximum of 10 partners while partnerships engaged in any other businesses can have a maximum of 20 partners.
The Partnership Act, 1932 governs such general partnerships in India.
A Partnership does not enjoy the status of separate legal entity independent of the partners. A Partnership business also attracts unlimited liability i.e if the assets of your business does not compensate your debt then your personal assets will be attached to pay that debt or liability.
A partner is personally liable for the debts of the firm and also is bound by the liabilities incurred by other partners while acting on behalf of the partnership business.
It is not mandatory for a partnership to be registered. However the major disadvantage of not registering is that a partner will not be able to file a suit regarding any dispute against third parties or even against other partners without having registered the partnership.
It is advisable to get the executed partnership deed registered at the Sub Registrar office under whose jurisdiction the office of the partnership firm lies. Post registration the partners may apply for a PAN card in the partnership’s name and open a bank account.
The partners forming part of a partnership business entity can at their will choose any name for their business. This is however subject to the following rules. As per section 58(3) of the Indian Partnership Act, 1932:
A partnership firm should not contain the following words in its name. These include Crown, Emperor, Empire, Empress, Imperial, King, Queen, Royal or other words that indicate sanction or approval by the government.
The name should not be too similar to any of the names of the existing firms engaged in similar businesses. The idea behind such a rule is to avoid injuring the reputation or goodwill of the existing firm if the new firm adopts a similar business name.
We have our own professionals and attorney to draft your deed and they will provide you the regular updates right from collecting the details and getting done with your Registration as well they will provide you legal advice at the end to end point.
FAQs On Partnership Firm Registration
1. Should a partnership firm be registered?
There is no provision under the partnership Act, 1932 which mandates the registration of partnership. However, the act itself provides for the procedure of registration of firm. Thus the registration is optional but highly recommended, as an unregistered firm shall not be able to recover any money in excess of INR 100/-. Apart from the above legal impediment, from the practical point of view also the firm should get registered in order to bring certainty in the relationship of partners and the firm per se.
2. Is a written partnership deed necessary to form a partnership firm?
No, it is not necessary. As the contract act does not makes it necessary to have the agreement in writing. However, it is always prudent to make a partnership deed to produce to the bank, income tax authorities and to clients with whom the partnership firm deals with. Apart from serving as a reference document a written partnership deed also helps in reducing conflict and confusion in due course of time.
3. What is the capital of a partnership firm?
Capital is the initial amount in cash or kind contributed by the partners to start the business. It is not necessary for each partner to contribute equally to the capital. Contribution is based on the agreement between the parties.
4. Who can be partners?
Partners must be major (above the age of 18), should be sane and should not be disqualified by law from entering into a contract.
5. Can a minor admitted to the benefits of partnership, become a partner on attaining majority?
A minor admitted to the benefits of partnership, has the option to become a partner within six months of attaining majority. He has to give a public notice stating his acceptance or rejection of partnership. In the absence of a notice, it is considered that he has become a partner of the firm.
6. What are my limitations as a partner?
As a partner you cannot do the following without the consent of the other partners: 1. Submit a dispute relating to the business to arbitration. 2. Open a bank account on behalf of the firm in your own name. 3. Compromise or relinquish any claim or portion of a claim of the firm. 4. Withdraw a suit or proceeding filed on behalf of the firm. 5. Enter into partnership with an outsider on behalf of the firm. 6. Acquire or transfer immovable property belonging to the firm. 7. Admit any liability in a suit or proceeding against the firm.
7. Can a partner transfer his right in the business of the firm to an outsider?
Yes, a partner can transfer his interest in the business to an outsider, but only with the consent of all other partners.
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Please note that Clidel Services private limited is platform for facilitating services through reliable professionals. The information on this website is for the purpose of knowledge only and should not be relied upon as legal advice or opinion.
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