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.