How to form a Partnership Firm in India?

The Partnership is that form of business entity which is owned and controlled by two or more persons who jointly contribute to the funds required for the conduct of business. A partnership firm can be formed with minimum of 2 and the maximum of 20 persons.


Partnership refers to the relation of principal and agent among the partners. Each partner represents the other partners in his dealings with the third parties and acts as their agent. In his capacity as agent, each partner minds the other partners with his commitments or liabilities contracted on their behalf. In India, partnership firms are governed by the Indian Partnership Act, 1932. Under this Act, it is not compulsory to register the partnership firm. There is however, only one formality, i.e. the partners has to decide the terms and conditions on which they agree to conduct their business jointly with other partner/partners. This agreement of partnership is called “partnership deed”.

The agreement can be oral or written. It is preferable to have partnership deed in written form. It is prepared on a stamp paper of Rs. 15 and should preferably be attested by a notary public, though it is not a legal requirement.


Advantages of Partnership Firm:

1. Registration is not compulsory in the case of Partnership firm. It can be formed without any legal formality and expenses. Thus they are simple and economical to form and operate.

2. Due the more number of members the partnership firm has larger resources for the business operations as compared to sole proprietorship.

3. In partnership every partner bears the risks individually as it is easier compared to sole proprietorship.


Disadvantages of partnership Firm:

1. Partnership firm does not exist for an indefinite period of time. The death, insolvency or lunacy of a partner may lead to dissolution of the partnership firm.

2. Liability of every partner in a partnership firm is unlimited as any of the partners may be called upon to pay all the debts even from its personal properties. A single wrong decision by one partner can lead other partners in heavy losses and liabilities.

3. According to partnership agreement every partner has equal rights. Some situations might occur in which one or the other partner will not agree on the same thing which will cause difference of opinion resulting mistrust and disharmony among the partners.


To start Partnership Firm in India just fill this form:

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