Partnership
What Is a Partnership?
A partnership is a formal arrangement between two or more persons to manage and operate a business/profession and share its profits.
A partnership firm is easy to form with fewer compliances as compared to companies.
The Indian Partnership Act, 1932 governs and regulates partnership firms in India. The persons who come together to form the partnership firm are knowns as partners. The partnership firm is constituted under a contract between the partners. The contract between the partners is known as a partnership deed (agreement) which regulates the relationship among the partners and also between the partners and the partnership firm.
There are several types of partnership arrangements. In a partnership business, all partners share liabilities and profits equally, while in others, partners may have limited liability. There also is the so-called "sleeping partner," in which one party is not involved in the day-to-day operations of the business.
Documents Required for formation of Partnership firm-
The documents required to be submitted to Registrar for registration of a Partnership Firm are:
- Application for registration of partnership (Form 1)
- Certified original copy of Partnership Deed.
- Specimen of an affidavit certifying all the details mentioned in the partnership deed and documents are correct.
- PAN Card,Photo and address proof of the partners.
- Proof of principal place of business of the firm (ownership documents or rental/lease agreement).
If the registrar is satisfied with the documents, he will register the firm in the Register of Firms and issue a Certificate of Registration.
Advantages of Partnership Firm
- Easy & Quick to form and collaborate.
- Less compliance as compared to companies.
- Sharing of profits & losses.
Disdvantages of Partnership Firm
- Difficulty in raising funds/loans.
- No perpetual succession.
- Unlimited liability of partners.
- Limitation on number of partners (Max 20).