Partnership Firm Registration in India
                     WHAT IS A PARTNERSHIP FIRM?
Partnership is a common form of business. Two or more people come 
together to carry on a business and share the profits and losses. 
Liability of the partners in a partnership firm is joint and several.
A partnership firm is not a 
separate legal entity distinct from 
its members. It is merely a 
collective name given to the 
individuals composing it.
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WHAT ARE THE CHARACTERSTICS OF PARTNERSHIP FIRM ?
 Existence of an agreement
 Existence of business
 Sharing of profits
 Contractual Relation
 Nature of liability
 Registration of firm
 Non-transferability of interest
 Existence of Business
 Unlimited Liability
 Restriction and Transfer of Share
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Existence of an agreement
 Partnership is the outcome of an agreement 
between two or more persons to carry on 
business. This agreement may be oral or in 
writing. The Partnership Act, 1932 (Section 5) 
clearly states that “the relation of partnership 
arises from contract and not from status.”
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Existence of business
 Partnership is formed to carry on a business. As 
stated earlier, the Partnership Act, 1932 [Section 
2 (6)] states that a “Business” includes every 
trade, occupation, and profession. Business, of 
course, must be lawful.
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Sharing of profits
 The purpose of partnership should be to earn 
profits and to share it. In the absence of any 
agreement, the partner should share profits 
(and losses as well) in equal proportions.
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Contractual Relation
 The person joining the partnership enters into a contract 
for running the business. According to Partnership Act, 
the relation of partnership arises from contract and not 
from status. The contract may be oral or written but in 
practice written agreement is made because it helps to 
settle the disputes if they arise later on.
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Nature of liability
 The nature of liability of partners is the same as 
in case of sole proprietorship. The liability of 
partners is both individual and collective. The 
creditors have a right to recover the firm’s debts 
from the private property of one or all partners, 
where firm’s assets are insufficient.
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Registration of firm
 Registration of a partnership firm is not 
compulsory under the Act. The only document or 
even an oral agreement among partners required 
is the ‘partnership deed’ to bring the partnership 
into existence.
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Non-transferability of interest
 No partner can assign or transfer his partnership 
share to any other person so as to make him a 
partner in the business without the consent of all 
other partners.
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Existence of Business
 Partnership can only be for some kind of business. The 
term ‘Business’ includes any trade, profession or 
occupation. By business we mean all activities 
concerning production, distribution and rendering of 
services for the purpose of earning profits. If the work is 
related to social service, we do not call it a business and 
hence no partnership.
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Unlimited Liability
 As in the case of a sole-trade business liability of the partners of a 
firm is unlimited. In case some obligation arises then not only the 
partnership assets but also the private property of the partners 
can be taken for the payment of liabilities of the firm to the third 
parties. The creditors can claim their dues from anyone of the 
partner or from all the partners. The partners are liable 
individually and collectively.
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Restriction and Transfer of Share
 No partner can sell or transfer his share to 
anybody else without the consent of the other 
partners. In case any partner does not want to 
continue in the partnership, he can give a notice 
for dissolution of the firm.
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