Overview
What is a General Partnership?
A General Partnership is a business structure in which two or more individuals manage and operate
a business in accordance with the terms and objectives set out in the Partnership Deed. This
structure is thought to have lost its relevance since the introduction of the Limited Liability
Partnership (LLP) because its partners have unlimited liability, which means they are personally
liable for the debts of the business. However, low costs, ease of setting up and minimal
compliance requirements make it a sensible option for some, such as home businesses that are
unlikely to take on any debt. Registration is optional for General Partnerships. Contact our
Vakilsearch experts now to know the recent partnership deed format. Also, partnership firm
registration online can be done with a few documents in simple steps.
Facts
6 Essential Facts on Partnership
What is a partnership firm?
A partnership firm is a business structure in which two or more individuals manage and operate a
business in accordance with the terms and objectives set out in a Partnership Deed that may or
may not be registered. In such a business, the members are individually partners and share the
liabilities as well as profits of the firm in a predetermined ratio.
Why should I set up a partnership firm?
A partnership firm is best for small businesses that plan to remain small. Low costs, ease of
setting up and minimal compliance requirements make it a sensible option for such businesses.
Registration is optional for General Partnerships. It is governed by Section 4 of the
Partnership Act, 1932. For larger businesses, it has lost its relevance with the introduction of
the Limited Liability Partnership (LLP).. This is because an LLP retains the low costs of a
partnership while providing the benefit of unlimited liability, which means that partners are
not personally liable for the debts of the business
Is a partnership firm a separate entity?
The partners in a partnership firm are the owners, and thus, are not a separate entity from the
firm. Any legal issues or debt incurred by the firm is the responsibility of its owners, the
partners.
How many partners can there be?
A partnership must have at least two partners. A partnership firm in the banking business can
have up to 10 partners, while those engaged in any other business can have 20 partners. These
partners can divide profits and losses equally or unequally.
Is partnership firm registration necessary?
No, partnership registration is not necessary. However, it is advisable for you to have a
partnership firm registration online. Also, remember that for a partner to sue another partner
or the firm itself, the partnership should be registered. Moreover, for the partnership to bring
any suit to court, the firm should be registered. For this reason, it is recommended that larger
businesses register the partnership deed.
What are the main aspects of a partnership deed?
The deed should contain names of the partners and their addresses, the partnership name, the date
of commencement of operation of the firm, any capital invested by each partner, the type of
partnership and profit-sharing matrix, rules and regulations to be followed for intake of
partners or removal.
Documents Required
Documents Required for Partnership Registration
- Form No. 1 (Application for registration under Partnership Act)
- Original copy of Partnership Deed, signed by all partners
- Affidavit declaring intention to become partner
- Rental or lease agreement of the property/campus on which the business is set
Benefits
Benefits of a Partnership
Minimum Compliance
For General Partnerships, there is no need for an auditor to be appointed or, if the company is
still in the process of registration or incase unregistered, annual accounts filing with the
registrar is not necessary either. When compared to LLP, annual compliances are also fewer.
Further, taxes depending on turnover, service and sales tax also need not be filed in General
Partnerships.
Simple to Begin
General Partnerships can begin simply with an unregistered deed of the partnership within 2-4
business days. However, having registration for the same has its own perks and advantages. The
primary advantage for having a registered firm is that it will allow you to book lawsuits in
courtrooms opposing another business or the business associates in the firm for the
administration of rights addressed in the Partnership Act.
Comparatively Economical
In comparison to LLP, a General Partnership is much cheaper to begin. Even in the longer run, it
will still work out inexpensive as the compliance requirements are very minimal. For example,
there is no need for an auditor. Therefore, Home businesses still opt for this, although it
offers unlimited liability.
Process Duration
Common Partnership Policies
4 BUSINESS DAYS
Once we receive your request, our representatives will contact you to better grasp your
specifications. Additionally, If other information is needed, we will reach out to you once
again. Our lawyers and legal experts will carry out your requests. Once they are done, it will
be sent for your viewing and verification within 4-5 business days. However, you can always
contact us if there are changes needed.
4 BUSINESS DAYS
If there are any changes required to the agreement, our experts will have them altered. As agreed
upon iteration changes twice is covered in the original cost.