Business Registration
Understand what the partnership deed must cover, how registration with the Registrar of Firms works, and what partners take on. We draft the deed and handle the registration.
What it is. A partnership firm is a business owned by two or more people who have agreed to share its profits, governed by the Indian Partnership Act, 1932. The firm is not a separate legal entity from its partners.
Typical timeline: the deed can usually be drafted and executed within a few working days. Registrar of Firms processing time varies from state to state. Estimated timelines can vary depending on documentation, government processing and other factors outside our control.
Quick answer
A partnership firm is a business carried on by two or more people who have agreed to share its profits, under the Indian Partnership Act, 1932. It is not a separate legal entity, and the partners are personally liable for the firm's debts without limit. The firm is formed by a partnership deed. Registering it with the state's Registrar of Firms is optional in law but advisable, because an unregistered firm cannot sue to enforce its contracts.
How it is structured
A partnership firm is its partners, working together under a deed. The deed settles who contributes what, who shares the profit and who decides, but nothing separates the business from the people behind it.
The partners own and run it, and carry its debts personally.
PARTNERS
Partnership Firm
Not a separate legal entity
Partners’ liability is unlimited and joint
Is it right for you?
Worth weighing before you commit, because changing structure later is not free.
A good fit for
Where it may not fit
Benefits
A partnership comes into existence through the partnership deed the partners sign. There is no incorporation application to the Ministry of Corporate Affairs and no waiting on a central approval.
The main costs are deed drafting, the stamp duty set by the state and, if you register, the Registrar of Firms fee. There are no annual ROC filings and no mandatory statutory audit.
Capital, profit sharing ratios, drawings, responsibilities and the process for admitting or retiring a partner are whatever the partners write into the deed.
The partners run the business themselves. There is no board, no separate shareholder layer and no requirement to hold formal meetings or record minutes.
The firm is taxed as a separate assessee at the rate applicable to firms. Partners are not taxed again on their share of the firm's profits, though interest and remuneration received from the firm are taxable in their own hands.
Eligibility
Requirements vary with the people involved and the premises. We confirm the exact list before anything is prepared.
The process
6 stages, what happens at each, and who acts. Select a step to see the detail.
STEP 1 OF 6 · PARTNERS DECIDE
Partners settle capital contribution, profit and loss sharing ratios, remuneration and interest on capital, roles, banking authority and what happens when a partner joins, retires or dies.
STEP 2 OF 6 · RAULJI GROUP DRAFTS
Those terms are written into a deed. A deed that is vague about profit sharing, drawings or exit is the single most common source of later disputes between partners, so this is the step worth spending time on.
STEP 3 OF 6 · PARTNERS SIGN
The deed is executed on stamp paper of the value prescribed by the relevant state and signed by all partners in the presence of witnesses. Stamp duty rates differ from state to state.
STEP 4 OF 6 · RAULJI GROUP APPLIES
The firm applies for its own PAN in the firm's name, which the bank will require to open a current account in the name of the business.
STEP 5 OF 6 · REGISTRAR OF FIRMS DECIDES
Registration is optional but strongly advisable. The application is made in the prescribed form to the Registrar of Firms for the state, with the deed and the required proofs, and a certificate of registration follows.
STEP 6 OF 6 · YOU, WITH OUR SUPPORT
A current account is opened in the firm's name, and any registrations your activity needs, such as GST or a shop and establishment licence, are applied for.
Timeline
The deed can usually be drafted and executed within a few working days. Registrar of Firms processing time varies from state to state.
An estimate, not a commitment. Estimated timelines can vary depending on documentation, government processing and other factors outside our control.
Drafting the deed once the partners have settled their terms, then the PAN and Registrar applications. Agreeing the terms usually takes longer than writing them down.
Registrar of Firms processing, which varies from state to state.
What we handle
Pricing
Two kinds of money are involved: our professional fee, and the government and state charges we do not set. Nothing on this page is an all-inclusive price.
We confirm the full expected amount, split this way, in writing before any filing begins.
Next steps
Registration starts the obligations rather than ending them. These are the ones that follow for this structure.
The firm applies for a PAN in its own name, which the bank needs to open a current account in the firm's name.
GST where turnover or the type of supply requires it, and a shop and establishment registration for the premises.
The firm is assessed separately at the rate for firms. A tax audit applies once turnover crosses the Income Tax threshold.
Changes in partners, the firm name or the place of business are notified to the Registrar of Firms so the registered details match the firm.
Important considerations
The problems we see most often with a Partnership Firm, and how to avoid each one.
Profit share, drawings, interest on capital and what happens when a partner leaves are where partnership disputes start. The default rules in the Act may not be what anyone intended.
An unregistered firm cannot go to court to recover money a customer owes it. Registering later is possible, but a dispute rarely waits.
Every partner is liable for the firm's debts, including those created by another partner acting for the firm.
A deed on stamp paper of the wrong value can be refused as evidence until the shortfall and a penalty are paid.
Comparison
The two unincorporated structures. The difference is how many owners there are and who shares the liability.
Partnership
Proprietorship
Partnership: Minimum 2 partners, maximum 50
Proprietorship: A single owner only. Co-owners are not possible.
Partnership: Run directly by the partners, on the terms written into the partnership deed.
Proprietorship: Run by the owner alone. There is no separate management layer.
Partnership: Unlimited and joint. Partners are personally liable, including for each other's acts in the firm's name.
Proprietorship: Unlimited. Personal assets are exposed to every business debt.
Partnership: Low. No annual ROC filing. Income tax return and any GST obligations apply.
Proprietorship: Lowest. No ROC filing. Obligations follow the registrations held, plus the proprietor's own income tax return.
Partnership: No. Capital can only come from existing or newly admitted partners.
Proprietorship: No. There is no mechanism to bring in an investor without changing structure.
Partnership: Two or more people starting together at low cost, where limited liability is not the priority
Proprietorship: A single owner starting small, with limited liability exposure and no plan to bring in partners
Talk to us
Send your details and we will come back to you on what your business actually needs, what it will cost, and how long it is likely to take.
We will get back to you with what applies to your business specifically.
A partnership firm is a business carried on by two or more people who have agreed to share its profits, under the Indian Partnership Act, 1932. The firm is not a separate legal entity, so in law the partners collectively are the business, and they are personally responsible for its obligations.
At least two. The maximum is 50 partners, as prescribed under the rules made under the Companies Act. Every partner must be competent to contract, so a minor cannot be a partner, although a minor can be admitted to the benefits of a partnership with the consent of all partners.
The partnership deed is the written agreement between the partners. It records capital contributions, profit and loss sharing ratios, remuneration and interest on capital, each partner's duties and authority, banking arrangements, and how a partner is admitted, retires or is removed. Where the deed is silent, the default provisions of the Partnership Act apply, which may not be what the partners intended.
No. The Indian Partnership Act, 1932, does not compel registration, and a firm can legally operate without it. However, section 69 prevents an unregistered firm or its partners from suing to enforce a contractual right against the firm or against a third party. In practice that means an unregistered firm cannot go to court to recover money a customer owes it, so we recommend registering.
PAN, Aadhaar, identity proof, address proof and a photograph for each partner, the partnership deed executed on stamp paper, proof of the firm's place of business, a rent agreement if the premises are rented, and a no-objection certificate from the owner.
The partners agree their terms, a deed is drafted and executed on stamp paper of the value prescribed by the state, the firm applies for its own PAN, and an application is filed with the Registrar of Firms for the state with the deed and supporting proofs. The Registrar issues a certificate of registration on approval.
The difference that matters most is liability. In a partnership firm the partners are personally liable without limit, including for the acts of the other partners. In an LLP, liability is limited to the agreed contribution and a partner is not personally liable for another partner's wrongful acts. An LLP is also a separate legal entity and can hold property in its own name, but it carries annual ROC filing obligations that a partnership firm does not.
Yes. The LLP Act and the Companies Act both provide routes for converting a registered partnership firm into an LLP or into a company, subject to conditions including the consent of all partners. Many firms start as a partnership and convert once the business grows or once limited liability becomes a real concern.
The firm is assessed to income tax as a separate entity at the rate applicable to firms, plus applicable surcharge and cess. A partner's share of the firm's profit is exempt in the partner's own hands because it has already been taxed in the firm, but interest on capital and remuneration received from the firm are taxable for the partner, and are deductible for the firm only within the limits set by section 40(b).
By location
Not listed? We work across Gujarat, and the process is the same wherever you are.
If this one does not look like the right fit, these are the alternatives. For a decision that is still open, start with business consulting.
Related guides
Longer guides on the same decision, written for someone choosing rather than buying.
Business RegistrationPartnership Firm vs Proprietorship: Key DifferencesNeither is a separate legal entity, and in both the owners carry unlimited liability. The differences that matter are about how many people are involved and what is written down.Read the guide 
Business RegistrationPartnership Deed Checklist: 12 Clauses to Discuss Before SigningA partnership deed is where two people decide, while they still agree, what happens when they do not. Here are the twelve clauses worth discussing, and what the law fills in if you leave them out.Read the guide 
Gujarat BusinessStarting a Business in Gujarat: Registration OptionsIncorporation is a central process, so it works the same from Rajkot as from Delhi. What is genuinely local is everything around it: stamp duty, the Registrar of Firms, professional tax and the Shops and Establishments Act.Read the guide 
Tell us about the business and we will confirm the structure, the documents and the cost before anything is filed.
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