What is partnership firm?

• A partnership firm is where two or more persons come together to form a business and divide the profits in an agreed ratio.
• The Indian Partnership Act, 1932 governs and regulates partnership firms in India.
• The partnership business includes any kind of trade, occupation and profession.
• A partnership firm is easy to form with less compliance as compared to companies.
• The persons who come together to form the partnership firm are known’s as partners. 
• The partnership firm is constituted under a contract between the partners. The contract between the partners is known as a partnership deed.
• A partnership deed is an agreement between the partners in which rights, duties, profits shares and other obligations of each partner is mentioned. A partnership deed can be written or oral, although it is always advisable to write a partnership deed to avoid any conflicts in the future.
• There are two types of partnership firm –

1. General Partnership Firm

2. Limited Liability Partnership (LLP) Firm

General Partnership Firm:

• In a general partnership, the liability of each partner is unlimited. It means if the firm’s assets are inadequate to pay off the debts, the creditors can realize the debts by attaching the personal property of partners.
• Documents required for Partnership Firm Registration:
  • PAN Card and Aadhar card of partners
  • Photo of partners
  • Partnership Deed
  • Rent Agreement / NOC and Electricity bill for registered office

Limited Liability Partnership (LLP):

• Limited liability partnership is registered under the Limited Liability Partnership Act, 2008. 
• Minimum Two partners are required for registration.
• The main characteristics of a limited liability partnership are as follows:
• A limited liability partnership must be registered under the Act with a minimum of two partners. There is no limit on the maximum number of partners.
• An LLP is a body corporate having a separate legal entity and perpetual succession.
• In an LLP the liability of partners is limited to their agreed contributions to the LLP. No partner would be liable on account of any unauthorized or independent actions of other partners.
• The liability of partners and the firm would become unlimited in case the firm or its partners carry out any act with the intention to defraud the creditors or any fraudulent purpose.
• Documents required for LLP Registration:
  • PAN and Aadhar card of partners
  • Photo of partners
  • Partnership Deed
  • Rent Agreement/NOC and Electricity bill for registered office
  • Address Proof (Passport/Votor card/Ration card/Driving License/Electricity Bill/Telephone Bill/Aadhar Card)
  • Residential Proof (Bank Statement 2 month latest / Electricity Bill/Telephone Bill/Mobile Bill)

Details Required in a Partnership Deed:

1. General Details:

• Name and Address of the Firm and all the Partners
• Nature of Business
• Date of Starting of Business
• Capital to be contributed by each Partner
• Profit & Sharing ratio among the Partners

2. Specific Details:

Apart from these, certain specific clauses may also be mentioned to avoid any conflict at a later stage:

• Interest on capital invested
• Drawing by partners
• Nature of Business
• Date of Starting of Business
• Capital to be contributed by each Partner
• Profit & Sharing ratio among the Partners