Partnership Firm in India
Partnership is defined as a relation between two or more persons who have agreed to share the profits of a business carried on by all of them or any of them acting for all. The owners of a partnership business are known as the 'partners' and collectively as a 'firm'. Partnership is an appropriate form of ownership for medium sized business involving limited capital. This may include small scale industries, wholesale and retail trade, small service concerns like transport agencies, real estate brokers, professional firms like chartered accountants, doctor's clinic, attorney or law firms etc.
Its main features are:
- Ease of formation: A partnership is easy to form as no arduous legal formalities are involved.
- Minimum number of partners: The minimum number of partners must be two, while the maximum number can be 10 in case of banking business and 20 in all other types of business.
- No separate legal existence: The firm has no separate legal existence of its own i.e., the firm and the partners, both are same in the eyes of law.
- Liability of the partners is unlimited: It means that if the assets and property of the firm is insufficient to meet the debts of the firm, the creditors can recover their loans from the personal assets of the individual partners.
- Restrictions on the transfer of interest: None of the partners can transfer his interest in the firm to any person (except to the existing partners) without the consents of all other partners.
- Limitation of Partnership Firm's span of life: A firm may be dissolved in any of the following ways:- by consent, by agreement, compulsory dissolution, dissolution by court etc..
- Ease of formation
- More capital investment and credit opportunities and
- Better judgment and more managerial abilities
- Absence of ultimate authority
- Liability for the actions of other partners and
- Unlimited liability
Procedure for registering partnership concern:
- The law relating to a partnership firm is contained in the Indian Partnership Act, 1932.
- Partnership Act, 1932 does not provide for compulsory registration of firms. It is optional for partners to get the firm registered.
Impact of non registration of partnership firm (sec-69):
- A partner of an unregistered firm cannot file a suit in any court against its own firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership deed or agreements.
- No suits to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party
- An unregistered firm or any of its partners cannot claim a set off (i.e. mutual adjustment of debts owned by the disputant parties to one another) or other proceedings in a dispute with a third party.
However, non-registration of a Partnership firm shall not affect the rights of third parties to sue the firm and/or its partners.
A partnership firm may be registered at any time (not merely at the time of its formation but subsequently also) by filing an application with the Registrar of Firms of the area in which any place of business of the firm is situated or proposed to be situated.
- Application shall contain:-
- Name of the firm.
- Place or principal place of business.
- Names of any other places where the firm carries on business.
- Date on which each partner joined the firm.
- Name in full and permanent address of partners.
- Application shall be signed and verified by all the partners or their duly authorized agents.
- Application shall be accompanied by prescribed fee as well as the following documents:
- Prescribed Registration Form for Incorporation of a Partnership firm. (Form No. 1 and Specimen of Affidavit).
- Certified true copy of the Partnership deed entered.
- Ownership proof of the principal place of business.
- When the Registrar of Firms is satisfied that the aforesaid provisions have been duly complied with, he shall record an entry of the statement in the Register of Firms and issue a Certificate of Registration.