Partnership firms in India are governed by the Partnership Act, 1932. Section 4 of the Act defines Partnership as - "An agreement between persons who have agreed to share profits of the business carried on by all or any one of them acting for all." Registration of partnership firm may be done at any time – before starting a business or anytime during the continuation of partnership. It is always advisable to register the firm since a registered firms enjoy special rights which aren’t available to the unregistered firms.
An application form along with fees is to be submitted to Registrar of Firms of the State in which the firm is situated. The application has to be signed by all partners or their agents.
Application for registration of partnership (Form 1)
Proof of principal place of business (ownership documents or rental/lease agreement)
Identity proof of partners - PAN Card, Voters' ID card, Passport etc.
Address proof of partners - electricity bills, ration cards, Aadhaar Card, Passport etc.
Certified original copy of Partnership Deed
Stamp Duty of appropriate value
If the registrar is satisfied with the documents, he will register the firm in Register of Firms and issue Certificate of Registration.
Register of Firms contains up-to-date information on all firms and can be viewed by anybody upon payment of certain fees.
Name and address of the firm and all the partners
Nature of business
Date of starting of business Capital to be contributed by each partner
Capital to be contributed by each partner
Profit/loss sharing ratio among the partners
Registering a firm under the Partnership Act (hereinafter called the Act) is not mandatory as in the case of setting up a company. That said it is always advisable to get your firm registered at Registrar of Firms/Department of Industries of the Town/City where you are planning to set up the business.This ensures that you get a legal proof of the firm's existence.
Gives partners the ability to file a case against third parties, and other partners
Grants the power to claim set-off against any third-party claim
It's easier and faster to convert into any other business structure if the partnership is registered
Partnerships are dependent on two or more individuals working together for making profits in a business. If one of them disagrees with the other, it can harm the business. Hence, it’s best to choose your partner cautiously for a successful business arrangement. A lot of thought should go in choosing a right partner for your business. People with similar mind-sets, goals, and values usually create successful partnerships. Before you sign the partnership deed it is better to gauge your options.