Partnership Firm

01 About the Partnership Firm

A partnership firm is two or more persons carrying on business together under a partnership deed that sets out capital, profit sharing, duties and what happens when a partner leaves.

It is common for traders, family businesses and small manufacturers because it can be set up within days.

02 Benefits

• Quick and inexpensive to form: a partnership deed on stamp paper, PAN for the firm and a bank account.
• No annual filings with the Ministry of Corporate Affairs and no compulsory audit unless the tax-audit limits apply.
• Flexible: partners decide capital, profit sharing and management in the deed.
• Interest on capital and remuneration to working partners can be paid and claimed as expenses within the limits of the Income-tax Act.
• Simple to change or dissolve by agreement.

03 Must understand before creating

• Unlimited, joint and several liability: partners' personal assets can be used to pay the firm's debts, including debts caused by another partner.
• Not a separate legal entity: the firm and its partners are treated as one, and the firm may dissolve on the death or exit of a partner unless the deed provides otherwise.
• An unregistered firm cannot file a suit against third parties to enforce its contracts, and partners cannot sue the firm or each other on the deed.
• Banks and investors are more cautious; raising large finance is harder.
• Every change of partners or terms needs a revised deed and updates to registration, PAN, GST and bank records.
• Without a carefully drafted deed, disputes between partners are common and hard to resolve.

Usually needed to register: A partnership deed, PAN of the firm, identity and address proofs of partners, and address proof of the business place.

04 Send your requirement

Tell us about the business you plan to set up. Your details go to our office by email and we will get back to you.