It is a simpler form of association of two or more persons to do the business in a collective form. It is governed by Indian Partnership Act, 1932. It is voluntary for the partners to get their Partnership Firm registered or not. Further, the inter-se agreement for joining persons as partners may be express or implied. However, for the opening of bank account or fulfillment of statutory compliances etc and also avoiding any other future issue, it is better to have a partnership deed in writing.
Like Proprietorship firm, the Partnership also does not possess any individual legal entity on its own and therefore the liability of all partners in this case is unlimited. Likewise, all the partners are liable for any wrongdoing in the partnership firm without particular reference to individual partners.
How to Form a Partnership Firm – Documents Required
- PAN Card of the Proposed Partners along with their Address Proof
- Selection of Name of Partnership
- Address Proof for Proposed Place of Business
- Partnership Deed (“Though no compulsorily, however, should be preferred”) setting out the roles, responsibilities of partners, financial contribution and their profit sharing ratio etc.
- Registration of Partnership (Not Compulsory)
- PAN Card of Partnership Firm
- Statutory Registration e.g. MSME/GST/TAN etc.
- Open a Current Account in the name of the firm
- Start Doing Business
- Easy to Start as its registration of Partnership is not compulsorily.
- Statutory Compliances are relatively lesser in case of Partnership Firm as compared to Body Corporate
- Exemption from maintaining Books of Account in case of Income declaration under Presumptive Income Basis up to Rs. 2 Cr.
- Exemption from Audit up to Rs. 50 lacs in case of service organization and Rs. 100 lacs in case of others or Income Declaration under Presumptive Basis.
- Relatively Lower Cost of Operation
- Easy to wind up the operations if required.
- Relatively Difficult in accessing the External Finance in the form of Debt and Equity as compared to Body Corporate
- The Liability of Partners for the operations of the firm is joint and several.
Ideal for Whom
- Generally for new Start-Up Ventures looking to start the operations jointly with other persons with a common mind and objective.