A partnership firm is a business arrangement where two or more individuals collaborate to operate a business and share its profits and losses. Each partner may contribute capital, skills, or both to the venture.
Partnership firms generally fall into two categories:
• General Partnership: All partners share unlimited liability and are typically involved in the day-to-day operations.
• Limited Partnership: Some partners have limited liability and are not engaged in managing the business.
Registering a partnership firm offers several benefits, such as:
• Recognition as a separate legal entity
• Enhanced trust among clients and suppliers
• Defined liabilities
A partnership deed is a formal agreement that specifies the terms of the partnership, including each partner’s duties, share in profits, decision-making rights, and other operational guidelines.
Yes, a partnership firm can be restructured into another business format, such as a private limited company, in compliance with applicable legal procedures.
Distribution of profits and losses is based on the terms laid out in the partnership deed or, in its absence, governed by the provisions of the Indian Partnership Act, 1932.
In a general partnership, partners have unlimited liability, which means personal assets can be used to cover business debts if necessary.
Yes, a partnership firm can hold assets, although these are usually registered in the names of the partners on behalf of the firm.
Partnership firms are treated as pass-through entities for tax purposes, meaning the firm’s income is taxed in the hands of the individual partners.
A minor cannot be a full-fledged partner, but with the consent of all existing partners, a minor may receive benefits from the partnership.