A partnership is two or more people running a business together under a partnership deed, governed by the Indian Partnership Act, 1932.
Key points
- A partnership needs at least 2 partners, and the number is capped by law.
- Partners are personally liable for the firm's debts, jointly and severally.
- The partnership deed sets out profit sharing, capital, roles and exit terms.
- The firm is taxed as a firm and gets its own PAN.
Is registration compulsory?
Registration with the Registrar of Firms is optional, but an unregistered firm faces restrictions when it needs to take legal action against a third party or a partner. Most firms choose to register.
The process
- Draft the partnership deed and execute it on stamp paper as required by your state.
- Apply for the firm PAN.
- Apply to the Registrar of Firms (if you register the firm).
- Register for GST, Udyam and other licences as your business requires, and open a current account.
When to consider an LLP instead
If you want limited liability, an LLP offers it with similar flexibility. A partnership can be converted into an LLP later.
Common questions
Is a partnership deed mandatory?
A written deed is not required by law to form a partnership, but it is strongly advisable and is needed for registration and for banks.
This guide is general information, not professional advice. Rules, thresholds and timelines change, so we confirm the current position for your case before filing. Government fees are separate from our service charge and are quoted before work begins.