With the expansion of business, it has become a lot difficult to run separate businesses and firms and be on top of the success ladder. It is a lot more beneficial for people to run the firms in partnership. A person who might have the business ability, might not have finances and so could get a financial partner. This will ensure that the firm has both capital and skills. According to Section 4 of the Indian Partnership Act of 1932, ‘Partnership is the relation between persons who have agreed to share profits of a business carried on by all.’
What is a partnership firm?
People who come together and work in the same firm in the capacity of co-workers and carry on the business to grow it further are called partners and the firm which has partners is called a partnership firm which is a single legal entity. The profits are shared according to the individual ownership which maintains a balance in the firm.
Essential elements of a partnership:
- Contract for partnership
- The maximum number of partners in a firm is 20
- Agreeing to carry on the business
- Sharing of profits
- Mutual agency in partnership
Partnership registration is critical as the nature of the partnership is not certain. It creates transparency for all the partners when the clauses are spelled. A well-drafted deed must include the name of the partnership, partners’ contribution, profit and loss allocation, partners’ authority, management duty, new partner admittance and, partner withdrawal.
Below listed are some of the benefits of partnership deed registration:
- Inculcating more skills- When you run a business with partners, it provides you a higher probability of achieving success and making money. Every minute a person is added into your firm as a partner, skills are added into the business. Some people might have the business minds and some the finances. Each partner has a special role in the firm and brings something valuable to the table.
- Settling a dispute- It is quite ordinary for a dispute to occur between partners and in that case a partner can most probably sue the other partner. According to section 69(2) of the Partnership Act, if the firm is registered and the person suing has been shown in the registers of the firms as partners of firms, then a suit can be instituted by or on behalf of the partnership firm in the name of the firm.
- Power to claim set-off- If a 3rd party sues the firm to recover a sum of money, the registered firm can claim a set-off i.e. it can claim the same for the 3rd party. But this benefit is only allowed to registered deeds.
On average, it takes about 10-15 days for the registration of a firm in India by the concerned authorities. There are no statutory partnership firm registration fees, except the stamp duties and professional fees. The professional fees depend upon the number of partners. The total cost including the professional fees and stamp duties for a partnership firm of 2 people is about ₹2000.