A Partnership Firm is a business structure where two or more individuals agree to share the profits and liabilities of a business carried on by all or any of them acting for all. It is governed by a mutual agreement called a Partnership Deed. Partnership Firm Registration process, particularly under the Indian Partnership Act, 1932. This guide covers types, legal requirements, documents, cost, and procedures for registering a Partnership Firm in India.
As per section 4 of the Partnership Act, 1932 “Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into a partnership with one another are called individually, “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm-name”.
A Partnership Firm is a popular and traditional form of business organization where two or more individuals agree to share profits, responsibilities, and liabilities of a jointly owned business.
1. Agreement between Partners
• The foundation of a partnership is a mutual agreement—oral or written—between two or more persons.
• This agreement is usually formalized in a Partnership Deed, which outlines:
- Profit-sharing ratio
- Duties of partners
- Capital contribution
- Rules for admission, retirement, etc.
The agreement defines the nature of the relationship and operational rules.
2. Minimum Two Partners Required
• A partnership firm must have at least two partners.
• The maximum number of partners is:
- 50 in India (as per Companies Act, 2013 Rule)
If the number falls below two, the firm is automatically dissolved.
3. Profit and Loss Sharing
• Partners share profits and losses in the ratio agreed upon in the Partnership Deed.
• If no ratio is specified, profits (and losses) are shared equally, by default.
4. Unlimited Liability
• In a traditional partnership firm, the liability of each partner is unlimited.
• Partners are personally liable for the debts and obligations of the firm.
5. Mutual Agency
• Every partner acts as both:
- An agent of the firm (can bind the firm in contracts)
- A principal (bound by acts of other partners)
6. No Separate Legal Entity
• A partnership firm is not a separate legal entity from its partners.
• The firm and the partners are legally treated as one and the same.
Tags : Partnership Firm Registration
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