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Partnership Firm

Startup Partnership Firm

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Partnership Firm

A partnership is one of the most important forms of a business organization. A partnership firm is where two or more persons come together to form a business and divide the profits in an agreed ratio. The partnership business includes any kind of trade, occupation and profession. A partnership firm is easy to form with fewer compliances as compared to companies.

The Indian Partnership Act, 1932 governs and regulates partnership firms in India. The persons who come together to form the partnership firm are known as partners. The partnership firm is constituted under a contract between the partners. The contract between the partners is known as a partnership deed which regulates the relationship among the partners and also between the partners and the partnership firm.

Check list


ID and Address Proof Bank Statement/Electricity Bill/Telephone bill/ Mobile Bill (not later than 2 months) of Directors & Shareholders

ID proof and Address Proof of the Promoters/Subscribers/Shareholders (PAN, Aadhar Card, Passport)

Passport size pictures of Directors

DSC of Directors and Shareholders

Mobile No. and Email id of Directors

Provide DIN if already have of Directors


Detailed Objects of the Company

Utility bill for registered office of the Company(Not older than 2 months)

Proof of ownership along with NOC of the owner


1. Easy Formation:
Partnership is a contractual agreement between the partners to run an enterprise. Hence, it is relatively ease to form. Legal formalities associated with formation are minimal. Though, the registration of a partnership is desirable, but not obligatory.

2. More Capital Available:
We have just seen that sole proprietorship suffers from the limitation of limited funds. Partnership overcomes this problem, to a great extent, because now there are more than one person who provide funds to the enterprise. It also increases the borrowing capacity of the firm. Moreover, the lending institutions also perceive less risk in granting credit to a partnership than to a proprietorship because the risk of loss is spread over a number of partners rather than only one.

3. Combined Talent, Judgement and Skill: As there are more than one owners in partnership, all the partners are involved in decision making. Usually, partners are pooled from different specialized areas to complement each other. For example, if there are three partners, one partner might be a specialist in production, another in finance and the third in marketing. This gives the firm an advantage of collective expertise for taking better decisions. Thus, the old maxim of “two heads being better than one” aptly applies to partnership.

4. Diffusion of Risk: You have just seen that the entire losses are borne by the sole proprietor only but in case of partnership, the losses of the firm are shared by all the partners as per their agreed profit-sharing ratios. Thus, the share of loss in case of each partner will be less than that in case of proprietorship.

5. Flexibility: Like proprietorship, the partnership business is also flexible. The partners can easily appreciate and quickly react to the changing conditions. No giant business organization can stifle so quick and creative responses to new opportunities.

6. Tax Advantage: Taxation rates applicable to partnership are lower than proprietorship and company forms of business ownership.

Liabilities of a Partner:

  1. 1) All Partners are jointly and severally liable for all acts of the firm. If the assets of the firm are not sufficient to satisfy the claims of outsiders, such claims can be recovered from the personal assets of any one, some or all partners.

  2. 2) A partner is liable to make good any loss caused to the firm due to his negligence or misconduct in the ordinary course of business.

  3. 3) A partner is liable for any act of the other partners acting within the scope of his authority.

  4. 4) A partner is liable for any profit made on account of dealing on behalf of the firm, to the firm.

  5. 5) A Partner is liable for any profit made by a business, competing with the business of the firm, to the firm.

  6. 6) A partner is liable for any profit made by putting the assets of the firm to personal use.

  7. 7) A partner is also liable to any third party for any wrongful act done by such partner, or any other partner of the firm.

  8. 8) A partner is liable for misuse of money of third parties received by the partner.

  9. 9) A retiring partner is also held liable for all such acts of the firm contracted before the term.

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