What is partnership firm?
A General Partnership is a business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in the Partnership Deed. This structure is thought to have lost its relevance since the introduction of the Limited Liability Partnership (LLP) because its partners have unlimited liability, which means they are personally liable for the debts of the business. However, low costs, ease of setting up and minimal compliance requirements make it a sensible option for some, such as home businesses that are unlikely to take on any debt. Registration is optional for General Partnerships.
Advantages of a Partnership:
General Partnerships do not need to appoint an auditor or, if unregistered, even file annual accounts with the registrar Annual compliances are also fewer as compared to an LLP.
Easy to start
It can be started with just an unregistered Partnership Deed in 2 to 4 days; registration, however, does bring a few advantages. It would enable you to file suits in court against another firm or partners in the firm for the enforcement of rights arising from a contract or right given by the Partnership Act.
A General Partnership is cheaper to start than an LLP and even over the long-term, thanks to the minimal compliance requirements, is inexpensive. You would not need to hire an auditor, for example. This is why, despite its severe shortcoming (unlimited liability), home businesses may opt for it.
Documents required for Partnership firm
- 1Form No. 1 (Application for registration under Partnership Act)
- Original copy of Partnership Deed, signed by all partners
- Affidavit declaring intention to become partner
- Rental or lease agreement of the property/campus on which the business is set