Partnership Firm

Most start-ups in recent times are evolving as partnership firms. Predominantly, the business types in India are either proprietorship firms or partnership firms. Partnership firms are the most common ones among the two. Partnership firms in India are led by the Indian Partnership Act, 1932.

In a partnership firm, the odds of having a successful business are high. The partners share their business ideas and complement each other’s weaknesses. On the other hand, as in any business, there are chances that it may not do well as intended. Or even worse, the firm may not do well merely because of one or more partners. Under these circumstances, differences may arise and might call for legal action. It is for this reason that it is preferable to have the firm registered.


Potential to sue the firm or sue the other partners:

Any conflict should arise between the partners or between the current and previous partners or even between one of the partners and the firm itself, and provided the conflict thus arising is out of the terms dictated in the partnership deed or the dispute is upon the rights vested on the partner by virtue of the Partnership Act, then a partner belonging to the firm in which the partnership is registered can always move to the Courts of Law.

The capacity of the firm to sue third parties:

In a registered partnership firm, one or more partners can always file a case in court when any of their contracts are not honoured. Partners of an unregistered firm are not given this lenience.

Right to use the principle of set-Off:

If the partnership firm is issued by another party to recover a sum the firm owes to this party, the firm can use the principle of set-off against this third party provided the latter also owes some amount of money to the partnership firm. The registered partnership firm can simply counterbalance the amount it owes to the third party.

Better credibility:

Despite the fact that the Partnership act renders both a registered and unregistered firm legal, it is a, sure enough, case that a registered partnership firm looks more credible in the eyes of a potential client

Ability to convert into an entity:

A registered partnership firm always has the ease of converting itself to another corporate entity like that of a Limited Liability Partnership (LLP) or a private company. This ease of conversion is not bestowed upon an unregistered firm.

Procedure to register a partnership firm:

Partnership deed     Stamp duty and notary    Obtaining a PAN    Opening of a bank account


  1. Application for registration of partnership (Form 1)
  2. Specimen of affidavit
  3. The electricity bill of the firm you want to get registered or documents on rental/lease agreement. It acts as a proof of the principal place of business.
  4. Certified original copy of the Partnership Deed