Formation of a Partnership Firm

Two or more people when come together with a common idea of business by infusing the sources and funds together with the common goal of earning profit is termed as Partnership. Partnership Firm is one of the common forms of business in India as it does not require stringent procedure to be followed and avails the flexibility in administration to the Partners.

The formation of Partnership Firm shall be with mutual consent of Partners to the business. The firm shall be formed and registered by following the procedure prescribed in this regards under Indian Partnership Act, 1932.


Indian Partnership Act allows a firm to be formed and executed by entering into Partnership Agreement. Further, it provides types of Partnership Firm as Unregistered Partnership Firm or Registered Partnership Firm. Whether the firm is registered or not the Partnership firm is legal in the eyes of Law.

  • Unregistered Partnership Firm:

The Unregistered Partnership Firm is established by entering into agreement by the partners of the proposed firm. The Unregistered Partnership Firm as stated to be legal allows the Partners to carry on the business in manner stated and provided in the agreement.

  • Registered Partnership Firm:

The Partnership Firm is to be registered with the Registrar of Firm (RoF) having jurisdiction over the Place of Business of the Firm. The registration of Partnership firm involves payment of Government fees to Registrar, varied from state to state according to the State Law.

The registration of partnership firm is preferable as the unregistered Partnership Firm cannot sue the third party or contracting party and vice-versa. Also, the Partners, in case of internal disputes or issues, cannot approach the Court and shall resolve the disputes with the help of arbitrator or alternate dispute resolution mechanism. Furthermore, the registration also helps the expansion and conversion of the Firm into any other form of Business.

An unregistered Partnership Firm at any stage can be registered in order to remove the deficiencies as prescribed above.

How to and Steps:- Partnership Firm Formation and Registration:

  • Preparation and Execution of Partnership Deed:

The Partnership Deed shall contain the covenants such as the name and business place of the firm, business activities to be carried on, the contribution and profit sharing ratio of the Partners or any other conditions required.

  • Payment of Stamp Duty and Notary:

The Partnership Deed prepared shall be executed by the payment of stamp duty as applicable in accordance with the respective state law. One may either opt for execution on non-judicial paper or franking i.e. payment of stamp duty from banking channel. Subsequently the deed shall be notarised after providing the signature of all partners along with witnesses to agreement.

  • Registration of Partnership Firm with RoF:

The registration of Partnership Firm is voluntary, however is preferable by the businessmen. The registration procedure prescribed by the respective Government shall be followed with payment of requisite Government Fees and submitting the documents required.

  • Application for PAN:

The application for allocation of PAN shall be made to the Income Tax department as the department identifies the Partnership different from its Partners.

  • Opening Bank Account:

The current account in the name of the Partnership Firm shall be opened in order to regulate the transaction of the Firm.

Documents required to register a Partnership Firm:

  • Self-attested copy of PAN card of Partners
  • Self-attested copy of Address Proof of Partners
  • Utility Bill as Business Address Proof
  • Rent or lease Agreement of Business Address (if place is rented)
  • NOC from the owner of Business Place (if place is rented)
  • Original Partnership Deed
  • Application form in the prescribed format
  • Any other documents as required by Registrar

The Partnership Firm is best suitable for starting any business having small scale of operations and requires flexibility in operations. Also, where the business idea involves higher risk of discontinuation or failure of products, can be started with Partnership Firm, which afterwards can be converted into any other form of business with the stability and growth of the business.

The introduction of LLP has caused erosion of popularity of Partnership Firm in India as LLP allows benefit of flexibility and tax advantages along with the benefit of Body Corporate

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Star Paper Mills Limited
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