Free Consultation by Expert

Many thanks to Setbharatbiz. We had an excellent experience working with its expert. They have a strong sense of professionalism when dealing with clients.

Mudassir CEO, Twinfinty DigiTech Solutions

We would recommend Setbharatbiz incorporation services to any founder without a second doubt. The process was beyond efficient and shows Setbharatbiz founder's vision

Nagasrinivas Director,Prakash Nagasrinivas & Saradhy Associates

I was searching for a company for assistance in the incorporation services. Then one of my friend tell me about Setbharatbiz and definitely the Setbharatbiz is the best.

Prakash Kakani Director, PNS EV Hub

Overview

Partnership Firm Registration

A Partnership Firm is a popular business structure in India, especially among small and medium-sized enterprises. Governed by the Indian Partnership Act, 1932, a partnership firm involves two or more individuals who agree to share the profits and liabilities of the business as specified in a partnership deed. In this structure, partners collectively manage the firm and have unlimited liability, which means that personal assets can be used to meet business obligations if needed. Partnership Firms can be registered or unregistered, although registration offers legal benefits such as the ability to sue in the firm’s name and protection in partner disputes. This structure is ideal for businesses focused on trust and mutual decision-making.

Why Registration is Important

  1. Legal Recognition : Provides the ability to sue and be sued in the firm’s name, ensuring legal enforceability.
  2. Dispute Resolution : Safeguards partner rights in legal disputes, enhancing partner protection.
  3. Increased Credibility : Registration builds trust among clients, suppliers, and financial institutions.
  4. Business Continuity : Formalizes the partnership, enabling smoother transitions or dispute resolutions.
  5. Operational Flexibility : Simplifies operations with fewer regulatory obligations than a company, while still offering legal benefits.


Documents Required

To register a Partnership Firm in India, the following documents are generally required

For Partners

For Partnership Registration



Procedures

The process of registering a Partnership Firm in India involves the following steps:

  • Partnership Deed
    Drafting the Partnership Deed
    The Partnership Deed is the most crucial document that outlines the roles, responsibilities, and profit-sharing ratios among the partners. It should include details such as the firm’s name, nature of business, capital contribution by each partner, and the process for admitting or removing partners.
  • Notarization
    Notarization of Partnership Deed
    The Partnership Deed must be printed on non-judicial stamp paper and signed by all the partners in the presence of a notary public.
  • Filing Application
    Filing of Registration Application
    Submit the registration application (Form 1) to the Registrar of Firms in the state where the firm’s registered office is located. The application must be accompanied by the notarized Partnership Deed and other required documents
  • Fees Payment
    Payment of Registration Fees
    Pay the prescribed registration fee to the Registrar of Firms. The fee varies from state to state.
  • Certificate
    Certificate of Registration
    Upon verification of the documents, the Registrar of Firms will issue a Certificate of Registration, officially recognizing the partnership firm.
  • PAN Card
    Application for PAN
    Once the firm is registered, apply for a PAN Card in the name of the partnership firm.
  • Bank Account
    Bank Account Opening
    With the PAN Card and Certificate of Registration, the firm can open a bank account in its name.


Features

Features & Benefits of Partnership firm In India

Easy Formation
Partnership firms are easy to form, requiring only a partnership deed and registration with minimal legal formalities.
Prev Next
Unlimited Liability
Partners are personally liable for the firm’s debts and obligations.
Prev Next
No Minimum Capital Requirement
There is no minimum capital requirement to start a partnership firm.
Prev Next
Profit and Loss Sharing
Profits and losses are shared among partners as per the partnership deed.
Prev Next
Mutual Decision-Making
Partners collaborate on decision-making and management of the business.
Prev Next

Partnership Firm Registration in India

Limited Compliance
Has fewer compliance requirements compared to a private limited company or LLP.
Prev Next
No Perpetual Succession
The firm ceases to exist if a partner dies, retires, or becomes insolvent unless otherwise agreed upon.
Prev Next
Tax Benefits
Partnership income is taxed separately from individual partner incomes, allowing for tax advantages.
Prev Next
Operational Flexibility
Provides flexibility to the partners in management without strict governance norms.
Prev Next
Legal Existence
An unregistered partnership cannot sue or enforce claims under certain circumstances.
Prev Next


Comparison between Partnership Firm, LLP And Private Limited Company

Features One Person Company (OPC) Private Limited Company Sole Proprietorship
Legal Status Not a Separate Legal Entity Separate Legal Entity Separate Legal Entity
Liability Unlimited Limited to the contribution Limited to shares
Number of Partners Minimum 2, Maximum 20 Minimum 2, No Maximum 2-200 (Shareholders)
Compliance Requirements Low Moderate High
Registration Requirement Optional Mandatory Mandatory
Audit Requirement Not Mandatory Conditional Mandatory
Profit Sharing As per Partnership Deed As per LLP Agreement As per shareholding
Perpetual Succession No Yes Yes
Ownership Transferability Difficult Possible with agreement Restricted


Frequently Asked Questions

Is it mandatory to register a Partnership Firm?

No, it is not mandatory to register a Partnership Firm in India. However, registration provides legal advantages, such as the ability to sue in the firm’s name.

What is the maximum number of partners allowed in a Partnership Firm?

A Partnership Firm can have a maximum of 20 partners. For professional firms like legal and accounting firms, the limit is 50 partners.

Can a Partnership Firm be converted into an LLP or Private Limited Company?

Yes, a Partnership Firm can be converted into an LLP or a Private Limited Company by following the prescribed legal procedures.

What happens if a partner wants to leave the firm?

The exit of a partner is governed by the terms of the partnership deed. The firm may continue or dissolve based on the provisions of the deed or mutual agreement among the remaining partners.

Are there any tax benefits for Partnership Firms?

An OPC must file annual returns, financial statements, and conduct annual general meetings. However, the compliance requirements are generally simpler than those for a Private Limited Company.

What should be included in a Partnership Deed?

A Partnership Deed should include the firm’s name, business address, nature of business, capital contributions, profit-sharing ratio, roles and responsibilities of partners, and procedures for admitting new partners or resolving disputes.

Overview

Partnership Firm Registration

A Partnership Firm is a popular business structure in India, especially among small and medium-sized enterprises. Governed by the Indian Partnership Act, 1932, a partnership firm involves two or more individuals who agree to share the profits and liabilities of the business as specified in a partnership deed. In this structure, partners collectively manage the firm and have unlimited liability, which means that personal assets can be used to meet business obligations if needed. Partnership Firms can be registered or unregistered, although registration offers legal benefits such as the ability to sue in the firm’s name and protection in partner disputes. This structure is ideal for businesses focused on trust and mutual decision-making.

Why Registration is Important

  1. Legal Recognition:Provides the ability to sue and be sued in the firm’s name, ensuring legal enforceability.
  2. Dispute Resolution:Safeguards partner rights in legal disputes, enhancing partner protection.
  3. Increased Credibility:Registration builds trust among clients, suppliers, and financial institutions.
  4. Business Continuity:Formalizes the partnership, enabling smoother transitions or dispute resolutions.
  5. Operational Flexibility:Simplifies operations with fewer regulatory obligations than a company, while still offering legal benefits.

Documents Required

To register a Partnership Firm in India, the following documents are generally required:

For Partners

For Partnership Registration


Procedures

  • Partnership Deed
    Drafting the Partnership Deed
    The Partnership Deed is the most crucial document that outlines the roles, responsibilities, and profit-sharing ratios among the partners. It should include details such as the firm’s name, nature of business, capital contribution by each partner, and the process for admitting or removing partners.
  • Notarization
    Notarization of Partnership Deed
    The Partnership Deed must be printed on non-judicial stamp paper and signed by all the partners in the presence of a notary public.
  • Filing Application
    Filing of Registration Application
    Submit the registration application (Form 1) to the Registrar of Firms in the state where the firm’s registered office is located. The application must be accompanied by the notarized Partnership Deed and other required documents
  • Fees Payment
    Payment of Registration Fees
    Pay the prescribed registration fee to the Registrar of Firms. The fee varies from state to state.
  • Incorporation Forms
    Filing of Incorporation Forms
    Complete SPICe+ Part B for company incorporation, providing details of the shareholder, nominee, and registered office.
  • Certificate
    Certificate of Registration
    Upon verification of the documents, the Registrar of Firms will issue a Certificate of Registration, officially recognizing the partnership firm.
  • Application for PAN:
    PAN and TAN Application
    Once the firm is registered, apply for a PAN Card in the name of the partnership firm.
  • Bank Account
    Bank Account Opening
    With the PAN Card and Certificate of Registration, the firm can open a bank account in its name.

Features

Features & Benefits of Partnership firm In India

Easy Formation

Partnership firms are easy to form, requiring only a partnership deed and registration with minimal legal formalities.

Unlimited Liability

Partners are personally liable for the firm’s debts and obligations.

No Minimum Capital Requirement

There is no minimum capital requirement to start a partnership firm.

Profit and Loss Sharing

Profits and losses are shared among partners as per the partnership deed.

Mutual Decision-Making

Partners collaborate on decision-making and management of the business.

Limited Compliance

Has fewer compliance requirements compared to a private limited company or LLP.

No Perpetual Succession

The firm ceases to exist if a partner dies, retires, or becomes insolvent unless otherwise agreed upon.

Tax Benefits

Partnership income is taxed separately from individual partner incomes, allowing for tax advantages.

Operational Flexibility

Provides flexibility to the partners in management without strict governance norms.

Legal Existence Depends on Registration

An unregistered partnership cannot sue or enforce claims under certain circumstances.

Comparison between Partnership Firm, LLP And Private Limited Company

Features One Person Company (OPC) Private Limited Company Sole Proprietorship
Legal Status Not a Separate Legal Entity Separate Legal Entity Separate Legal Entity
Liability Unlimited Limited to the contribution Limited to shares
Number of Partners Minimum 2, Maximum 20 Minimum 2, No Maximum 2-200 (Shareholders)
Compliance Requirements Low Moderate High
Registration Requirement Optional Mandatory Mandatory
Audit Requirement Not Mandatory Conditional Mandatory
Profit Sharing As per Partnership Deed As per LLP Agreement As per shareholding
Perpetual Succession No Yes Yes
Ownership Transferability Difficult Possible with agreement Restricted

Frequently Asked Questions

Is it mandatory to register a Partnership Firm?

No, it is not mandatory to register a Partnership Firm in India. However, registration provides legal advantages, such as the ability to sue in the firm’s name.

What is the maximum number of partners allowed in a Partnership Firm?

A Partnership Firm can have a maximum of 20 partners. For professional firms like legal and accounting firms, the limit is 50 partners.

Can a Partnership Firm be converted into an LLP or Private Limited Company?

Yes, a Partnership Firm can be converted into an LLP or a Private Limited Company by following the prescribed legal procedures.

What happens if a partner wants to leave the firm?

The exit of a partner is governed by the terms of the partnership deed. The firm may continue or dissolve based on the provisions of the deed or mutual agreement among the remaining partners.

Are there any tax benefits for Partnership Firms?

An OPC must file annual returns, financial statements, and conduct annual general meetings. However, the compliance requirements are generally simpler than those for a Private Limited Company.

What should be included in a Partnership Deed?

A Partnership Deed should include the firm’s name, business address, nature of business, capital contributions, profit-sharing ratio, roles and responsibilities of partners, and procedures for admitting new partners or resolving disputes.

Related Services