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One Person Company Registration

What is Partnership Firm?

A partnership firm is a business entity that aims to generate profits. It is established when two or more parties agree to jointly own and manage the business, and formalize the agreement through a Partnership Deed. By doing so, the risks and responsibilities of the business are distributed among the partners, lightening the burden on any one individual. Furthermore, the combination of capital and expertise from multiple partners facilitates the achievement of business goals. The Partnership Act of 1932 outlines the framework for running a partnership firm, and provides all the necessary provisions. This Act recognizes both registered and unregistered partnership firms in India. However, unregistered partnerships have certain limitations that may prompt partners to consider registering the firm. Nonetheless, such shortcomings can be addressed by registering the partnership firm at any time after its formation.


Benefits of Partnership Firm

Shared Responsibilities

The term "Partnership" inherently signifies a group of individuals joining forces for a shared business goal. In such an arrangement, the partners collectively bear the responsibility of operating and overseeing the business. To streamline operations, specific responsibilities or tasks may be assigned to one or more partners, as laid out in the Partnership Deed.

Operating Flexibility

A Partnership firm functions according to a Partnership deed that is mutually agreed upon and executed by the partners. This deed enables the partners to determine how the business is to be run, provided that they are in agreement. Furthermore, even after the Partnership deed is registered, it can be modified to suit changing needs. As long as the business operations are in accordance with the signed agreement, there are no restrictions or limitations imposed on the partners.

Pre-defined Object or Period

During the registration of a Partnership firm, the deed outlines the predetermined business objectives and activities, which serve as the primary purpose for commencing operations. The Partnership may be established for a specific duration or for the completion of a particular project or objective. Upon achieving the said goals, the Partnership is automatically dissolved.

Various Financial Returns to the Partners

Partners engaged in a Partnership firm are entitled to multiple forms of returns for their capital investments as well as their individual contributions. In addition to interest on capital and a portion of the profits, working partners may also receive remuneration as agreed upon by the partners. Furthermore, any share of profits received from the Partnership firm is exempt from taxes for the partner who receives it.


Documents required for formation of a Partnership Firm


PAN Card

A self-attested copy of PAN Card of all partners

Partners Address Proof

Self- attested copy of Aadhar Card and Voter ID/ Passport/ Driving License of all partners

Business Address Proof

Utility Bill (Electricity Bill) of the place of business

Rent Agreement

Rent Agreement and NOC from the owner of the place of business, if rented


Establish Partnership in 3 Easy Steps

1. Answer Quick Questions
  • Pick a Package that best fits your requirements
  • Fill in our questionnaires that take less than 10 minutes
  • Provide basic details & documents required for registration
  • Make payment through secured payment gateways
2. Experts are Here to Help
  • Assigned Relationship Manager.
  • Drafting a Partnership Deed
  • Payment of Stamp Duty on Deed
  • Application for PAN and TAN
3. Establishing a Partnership Firm
  • All it takes is 12 working days*
*Subject to Government processing time

Process to establish Partnership Firm

Day 1
  • Discussion and collection of basic Information
  • Providing Required Documents for Partnership firm registration
Day 2 - 4
  • Drafting a Partnership Deed
  • Review and confirmation from Partners
Day 5 - 7
  • Payment of Stamp Duty on the agreement
  • Partnership Deed Notarisation
  • Application for allotment of PAN and TAN
Day 8 onwards
  • Partnership Deed registration, if subscribed
  • Certificate of Registration from RoF*
Private Limited Company One Person Company Limited Liability Partnership Partnership Firm Proprietorship Firm
Applicable Law Companies Act, 2013 Companies Act, 2013 Limited Liability Partnership Act, 2008 Indian Partnership Act, 1932 No specified Act
Registration Mandatory Mandatory Mandatory Optional No
PLC must be registered with MCA under the Companies Act Same as Private Limited Company LLP must be registered with MCA under the LLP Act Partnerships can be registerd or Unregistered, there are obvious benefits to register with the State ROF No registration required. Registration under MSME or GST act are considered valid for Proprietor Firms
Number of Owners 2 – 200 Only 1 2 – Unlimited 2 – 50 Only 1
Minimum of 2 to maximum of 200 shareholders excluding present or former employees who are members Only one shareholder Minimum 2 Designated Partners are required. No limit on the number of maximum partners Minimum 2 partners, and maximum 50 partners The proprietor can be the only owner of the firm
Separate Legal Entity Yes Yes Yes No No
PLC is a separate legal entity, and can enter into contracts or own assets in it’s own name Same as Private Limited Comapany Same as Private Limited Comapany Partnership firm does not have any separate identity from its partners Proprietor and business are the same, and hold same PAN number
Liability Protection Limited Limited Limited Unlimited Unlimited
Limited to the share capital subscribed (may vary if defined as limited by guarantee or unlimited liability in the MOA) Same as Private Limited Company Limited to the capital contribution agreed by the partner in the LLP Agreement Partners are jointly and severally liable to pay the debts of the Partnership Firm Paying off the liabilities of the firm is the proprietor’s responsibility
Statutory Audit Mandatory Mandatory Based On Applicability Not Mandatory Not Mandatory
Required to appoint a statutory auditor within 30 days of company incorporation Same as Private Limited Company Statutory audit required when turnover exceeds INR 40 Lac or contribution exceeds INR 25 Lac No statutory audit required. Tax audit applicable on basis of total turnover Same as Partnership Firm
Ownership Transferability Yes Yes (Restricted) Yes Yes (Restricted) No
Shares are easily transferable, so it makes it a most preferred option for raising capital through external investors There is only one owner in OPC. 100% shares need to be tranferred to change ownership Ownership can be changed with consent of other partners, by drafting a supplementary agreement Ownership is not easily transferable. Partnership deed outlines the restriction for transfer of ownership Ownership of the proprietorship is not transferable
Perpetual Existence Yes Yes Yes No No
Private Company prevails with change in ownership or management OPC has a perpetual succession, but can only have one owner at any time Change in Partners or Designated Partners does not affect the existence of an LLP Change in partner leads to dissolution or formation of another partnership firm Death or insolvency of proprietor dissolves the business
Foreign Ownership Allowed Not Allowed Allowed Allowed Not Allowed
Foreign nationals can invest as per RBI and FEMA guidelines, usually under the Automatic Route Member, nominee and director must be an Indian resident Foreign nationals can invest as per RBI and FEMA guidelines, usually under the Automatic Route Nnon Resident Indian (NRI) can be a partner in the Partnership Firm, subject to RBI regulations Foreign Nationals cannot own proprietorship business in India
Taxability Moderate Moderate High High Low
Lower rate of 25% for companies with gross turnover of INR 400 Crore. Additional dividend distribution tax may apply Same as Private Limited Company Tax rate of 30% on business profits, tax benefits to partners on profit distribution is high Same as LLP Tax rates for individuals apply to Proprietorship Firm, as per the Income Tax slab
Compliance Requirement High High Moderate Low Low
Private company has the highest compliance requirements, both annual and event based OPC compliance requirements are similar to PLC, except conducting an Annual General Meeting (AGM) Annual filing and few event based filings are necessary, but lesser compliance requirements as compared to company structure ITR of partnership needs to be filed annually, no major compliance requirements otherwise No requirement to file a separate ITR. Very less to no compliance hassle

The formation and Registration of a Partnership Firm in India

Frequently Asked Questions


Under the Partnership Act, both registered and unregistered partnerships are considered legitimate and are recognized by law. Although registration is not mandatory, it is advantageous due to the potential drawbacks of remaining unregistered. Generally, businesses in their early stages opt for unregistered partnerships until they establish a stable footing. However, unregistered partnerships can be registered at any point after their formation.

The formation of a Partnership Firm does not mandate a specific minimum capital amount. The partners may start with any capital contribution that they deem appropriate. The partners have the freedom to contribute any amount of capital in any form, including tangible assets such as cash or property, as well as intangible assets such as goodwill or intellectual property. Additionally, partners may introduce capital in any proportion, regardless of whether it is uniform or uneven.

If a Partnership Firm remains unregistered, it cannot initiate legal action against any of its partners or third parties. Additionally, a partner cannot file a lawsuit against the Partnership Firm for their claims. However, third parties maintain the right to sue the firm to recover their dues or claims. Despite non-registration, the rights of third parties remain unaffected. The Partnership Firm can be registered at any point after its formation to negate the aforementioned consequences.

The formation of a Partnership Firm with only two partners is feasible by adhering to the stipulated procedures. Moreover, any Partner joining and being appointed to the Firm must be an Indian citizen and resident. Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) may only invest in a Partnership Firm with prior government authorization. Additionally, the individual must possess the capacity to contract and not be a minor. A minor may only be included in a Partnership Firm for profits.

It is important to note that only a registered partnership firm is entitled to claim set-offs or other legal proceedings in disputes with third parties. Therefore, it is highly recommended that partnership firms get registered as soon as possible. Moreover, only a registered partnership firm has the right to file a lawsuit in court against the firm or other partners to enforce any contractual or partnership-related rights as provided by the Partnership Act. An unregistered partnership firm can be registered at any time after its formation. .

To register a Partnership Firm in India, one must submit an application to the Registrar of Firms (RoF) with jurisdiction over the firm's Place of Business. This application must be accompanied by the Partnership Deed in the prescribed format. Once the registration procedure is complete, the RoF will issue a Certificate of Registration. The registration process and timeline may vary depending on the RoF.

The Partnership Deed should include specific details about the primary purpose and activities of the firm, as well as major clauses concerning capital contributions, profit-sharing ratios among partners, and management and administration of the Partnership Firm. Additionally, the Partnership Deed should be properly stamped and notarized after it has been signed.

To ensure the legitimacy of the partnership deed, the partners are required to pay the appropriate stamp duty based on the capital of the firm. The stamp duty amount varies depending on the capital contribution made by the partners. Each state has its own prescribed rate of duty under the State Stamp Act.

Every unregistered or registered partnership firm is required to have the Partnership Deed notarized.

The process of applying for PAN and TAN can be initiated after the Partnership Firm Agreement has been executed or after the partnership deed has been registered with the relevant Registrar of Firms. The physical copy of the PAN card will be dispatched by the Income Tax Department to the registered business address.

The registration process for a Partnership Firm in India typically takes around 12 to 14 business days. However, the issuance of the Registration Certificate may vary depending on the regulations of the concerned state. It's important to note that the time required for the registration of a Partnership Firm is subject to the government processing time, which may differ from state to state.

The Partnership Firm is required to maintain the Books of Accounts and Financial Statements. It is also mandatory to file the Income Tax Return for the respective financial year before the due date as per the Income Tax Act.

Partnership firms are not required to prepare audited financial statements annually. However, depending on the turnover and other criteria, it may be necessary to prepare a tax audit statement.

Converting a partnership firm into a private limited company or LLP is possible, but it can be a difficult, costly, and time-consuming process. For this reason, many entrepreneurs may find it more practical to start a company or LLP from the outset rather than starting with a partnership firm.

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