What is a Partnership Firm?
A partnership is a business structure where two or more persons agree to share profits and losses. Governed by the Indian Partnership Act, 1932.
Key Feature: Unlimited liability - partners jointly and severally liable for business debts.
Minimum and Maximum Partners
- Minimum: 2 partners
- Maximum (Banking Business): 10 partners
- Maximum (Other Businesses): 50 partners
Types of Partnership
- Registered Partnership: Registered with Registrar of Firms (recommended)
- Unregistered Partnership: No formal registration (limited legal rights)
- Partnership at Will: No fixed duration
- Particular Partnership: For a specific venture or time period
Partnership Deed - Essential Clauses
A partnership deed is the written agreement between partners. It should include:
- Name and address of firm and partners
- Nature of business
- Capital contribution by each partner
- Profit sharing ratio
- Interest on capital and drawings
- Salary/commission to partners
- Admission, retirement, and expulsion of partners
- Dissolution terms
- Dispute resolution mechanism
How to Register a Partnership Firm
- Draft and sign partnership deed on stamp paper
- Submit application (Form A) to Registrar of Firms
- Pay registration fees
- Provide address proof and identity proofs of partners
- Receive Certificate of Registration (within 15-30 days)
Documents Required for Registration
- Partnership deed (original)
- PAN Card of partnership firm
- PAN and Aadhaar of all partners
- Address proof of registered office
- Rental agreement/NOC from landlord
- Affidavit of no pending litigation
Rights of Partners
- Right to participate in business conduct
- Right to access books of accounts
- Right to share profits
- Right to interest on capital (as per deed)
- Right to indemnity for expenses incurred
Important Note: Unregistered partnership firms cannot file suits against third parties or partners. Registration is highly recommended.
Taxation of Partnership Firm
- Income Tax Rate: 30% flat rate
- Surcharge: 12% if income above ₹1 crore
- Health & Education Cess: 4%
- Alternate Minimum Tax (AMT): 18.5%
- ITR Form: ITR-5
Dissolution of Partnership
Partnership can be dissolved by: mutual agreement, court order, insolvency of partner, or by notice in partnership at will.