General Partnership

A General Partnership is a business model in which two or more persons operate a business in accordance with the terms mentioned in the Partnership Deed. This model is not preferred due to unlimited liability i.e., Partners are personally liable for the debts of the business compared to Limited Liability Partnership (LLP). However, home businesses that are unlikely to take on any debt low costs prefer this due to ease of setting up and minimal compliance requirements, and optional registration.

The partners in a partnership firm are the owners i.e., are not a separate entity from the firm. Any legal issues or debt incurred by the firm is the responsibility of its partners.

A partnership must have at least two partners, though can have up to 10 partners in the Banking business, while those in any other business can have 20 partners. These partners can divide profits and losses equally or unequally as per the partnership deed. Partnership registration is not necessary but advisable. Registration is needed to bring any suit to court, to sue another partner or the firm itself. Due to these reasons, it is recommended to register the partnership deed of larger businesses. 

The deed should contain names of the partner, addresses, the partnership name, the date of starting of operation of the firm, any capital invested by each partner, the type of partnership and profit-sharing ratio, rules and regulations to be followed for onboarding of partners or removal.

Advantages of partnership firm

A partnership firm is suitable for small businesses planning to remain small. Low costs, ease of setting up and minimal compliance requirements make it a logical option for such businesses. Registration is optional for General Partnerships and is governed by Section 4 of the Partnership Act, 1932. 

Documents Required for Partnership Registration

Documents Required for Partnership Registration include Form No. 1 (Application for registration under Partnership Act), Original copy of Partnership Deed, signed by all partners, Affidavit describing intention to become partner, Rental or lease agreement of the property on which the business is setup.

Benefits of a Partnership

• Minimum Compliance- For General Partnerships, there is no need for an auditor to be appointed, minimum annual compliances requirement, taxes depending on turnover, service, and sales tax also need not be filed in General Partnerships.
• Simple to start-General Partnerships can begin with an unregistered deed of the partnership within 2-4 business days. 
• Comparatively economical-In comparison to LLP, a General Partnership is much cheaper, to begin with.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.