Understanding “Partnership” for the purpose of ‘Partnership Firm’ in India
According to Section 4 of The Indian Partnerships Act, 1932 “Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Registration of partnership is not compulsory but registering it gives advantages to the partnership.
Pre-requisites for registration
- Minimum 2 partners out of which one partner must be an Indian resident
- The partners must have at least attained the age of 18 years
- None of the partners should be disqualified under the laws in force to form a partnership firm
- The proposed name of the partnership firm should not be identical or similar to an existing company/ LLP name/ partnership
- The proposed name of the partnership firm should not be similar to an existing pending or registered trademark
A minimum number of partners required for a partnership firm in India are 2 (two). It is registered under the said act by giving details of all the partners as necessary the partners of the firm will be held personally and severally liable for any losses incurred. The Registrar of Firms of the State is the administrative authority for registration of partnership firms in India.
The relationship between the partners as well as the profit and loss sharing ratio is governed by the Partnership deed entered into by the partners of the partnership firm. The partnership deed in India is required to be signed by all the partners before a notary public.
Addition of New Partner: A new partner in a partnership firm in India can be added by way of amendment of existing partnership deed and submission of the relevant form along with the supplementary partnership deed with the Ministry of Corporate Affairs (MCA).
Removal of a Partner: A partner may be removed in India by way of passing a resolution for excluding the partner from the partnership firm and amendment of existing partnership deed to the said effect.
Time frame: The estimated time frame for formation of partnership firm in India is approximately 10-15 days. However, this time frame may vary depending upon the backlog at the office of the Registrar of Firms of the relevant state.
Licenses to operate: A partnership firm is required to obtain respective central, state and municipal licenses/ registrations to operate its desired business in India. However, the nature and the type of licenses/ registrations will vary from business to business.
Dissolving a partnership: A partnership in India may be voluntarily dissolved in accordance with an agreement entered between the partners for the same.
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