Definition

A Partnership is defined by the Indian Partnership Act, 1932, as 'the relation between persons
who have agreed to share profits of the business carried on by all or any of them acting for all'.
This definition gives three minimum requirements to constitute a partnership, viz.
1. there must be an agreement entered into orally or in writing by the persons who desire to
form a partnership,
2. the object of the agreement must be to share the profits of business intended to be carried on
by the partnership, and
3. the business must be carried on by all the partners or by any of them acting for all of them.
The term 'person' is not defined by the Partnership Act. Section 2(42) of the General Clauses Act
defines 'a person' to include a company or an association or body of individuals, whether
incorporated or not. But the Supreme Court has held that this definition cannot be imported into
the Partnership Act, and the 'person' under the Partnership Act means either an individual or any
other legal entity such as a Limited Company registered under the Companies Act, or any other
Corporation constituted by or under any act of the Legislature as a body corporate. The Supreme
Court has observed that it is now well settled that Hindu Undivided Family cannot as such enter
into a contract of partnership with another person or persons because it is a fleeting body, its
composition changes by births and deaths, marriages and divorces and such a partner- ship is
likely to have a precarious existence. It, therefore, follows that a body of individuals such as an
unincorporated society cannot as such become a partner in a firm. It also follows that a
partnership firm cannot as such enter into a partnership with another individual or legal entity, or
with any other partnership firm because a partnership as such is not a .person. But in the case of
H.U.F. the Karta of the family or a member thereof can become partner with another individual
or with other legal entity or even with the partners or partner of a partnership firm because in
such a case It is the Karta or the individual member who is the partner for all purposes and not
the joint family whom he represents and the family does not become a partner of the firm. It has
been held that when two Kartas of two H.U.Fs. enter into a partnership agreement, the
partnership though popularly known as one between the two HUFs, in the eye of law, it is a
partnership between two Kartas and the other members of the two families do not 'ipso facto'
become partners. There is nothing to prevent individual members of one H. U. F. from entering
into a partnership with the individual members of another H.U.F. and in such a case it is the
partnership between the individual members and it is wholly inappropriate to describe such a
partnership as one between two HUFs. When the Karta of a H.U.F. enters into a partnership with
a stranger the members of the family do not ipso facto become partners in that firm and they
have no right to take part in its management or to sue for its dissolution.

The entrepreneurs willing to start up partnership firm may or may not go for
registering the business as the registration of the partnership firms in India is not
 compulsory. Even prior to the passing of the Indian Partnership Act, 1932, there
was 10 provision for registration of firms in India.

Though registration of the firm is optional at the discretion of the partners, an

unregistered firm suffers from certain disabilities. These disabilities have
indirectly made some sort of compulsion on the part of the firms to be registered.
In case of unregistered firm, payment of salary, commission, interest on
borrowings or drawings are not considered as allowable expenses for
determination of total income for payment of tax.

1. Procedure of Registration

Entrepreneurs desirous of setting a partnership firm may apply in the prescribed

form to be submitted to the Registrar of Firms of the State in which the business
of the firm is situated or proposed to be situated. The prescribed registration fee
also need to be deposited Along with the application. The application must be
signed by all the partners or their authorise agents.

The application or the statement must contain the following particulars:

The name of the firm.

The place or principal, place of business of the firm.
The names of other places where the firm carries on business.
The different dates on which partners joined the firm.
The full names and permanent addresses of the partners.
The duration of the firm.

When the Registrar is satisfied that the above provisions have been duly complied
with, he shall record an entry of the statement in the register of firms and file the
statement. The Registrar shall then issue a certificate of registration.

Effects of Non-Registration:

An unregistered firm and its partners suffer from the following disabilities:
i. An unregistered firm cannot file a suit against a third party to enforce a right
arising from a contract. (For example, for the recovery of the price of goods
supplied)

ii. A partner cannot file a suit against the firm or co-partners to enforce his rights
under the Partnership Deed.

iii. An unregistered firm cannot claim a set-off against a third party to enforce
right arising from a contract exceeding Rs.100 in value.

Exception: The non-registration of a firm, however, does not affect the follow
rights:

i. The rights of third parties to sue the firm or any partner.

ii. The rights of a partner to sue for dissolution of the firm, accounts after
dissolution and realisation of property after dissolution.

iii. The rights of firm or partners of firm having no place of business in India.

iv. The right to sue or claim a set-off of value not exceeding Rs. 100.

v. The powers of an Official Assignee or Receiver or the Court to realise the prop
of an insolvent partner.

Advantages / Benefits of Registration:

The effects of non-registration or disabilities of an unregistered firm have been

pointed above. Considering the same, the advantages or benefits of registration
can be as follows :

i. The firm can sue third parties to enforce its claim.

ii. A partner can enforce his claim against third parties or against his co-partner.
iii. The interest of third parties is safeguarded against fraud of partners because
statement submitted to the Registrar is a conclusive proof of the existence
partnership and the composition of partners.

iv. An incoming partner is empowered to enforce his dues against the other co-
partners otherwise he would have to rely on their honesty.

v. A retired or expelled partner is exempted from liabilities of the firm incurred

after his retirement or expulsion by giving a public notice and effecting the
necessary changes in the register of firms.

vi. It can avail tax benefits as per IT Act - 1962.

Procedure for Registration of a Partnership Firm

1. The law relating to a partnership firm is contained in the Indian Partnership Act,

1932.

2. Under Section 58 of the Act, a firm may be registered at any time (not merely at the

time of its formation but subsequently also) by filing an application with the Registrar

of Firms (the District Registrar, Registration and Stamps Department in the State of

Andhra Pradesh) of the area in which any place of business of the firm is situated or

proposed to be situated.

o Application shall contain:-

Name of the firm

Place or principal place of business

Names of any other places where the firm carries on business

Date on which each partner joined the firm

Name in full and permanent address of partners.

Duration of the firm

o Application shall be signed and verified by all the partners or their duly

authorized agents.

o Application shall be accompanied by prescribed fee as well as the following

documents:

Prescribed Registration Form for Incorporation of a firm. (Form No.

1 and Specimen of Affidavit)

Certified true copy of the Partnership deed entered into.

Ownership proof of the principal place of business

o Name of the firm should not contain any words which may express or imply

the approval or patronage of the government except where the Government of

India has given its written consent for the use of such words as part of the

firms name.

3. The law relating to a partnership firm is contained in the Indian Partnership Act, 1932.

4. Under Section 58 of the Act, a firm may be registered at any time (not merely at the

time of its formation but subsequently also) by filing an application with the Registrar

of Firms (the District Registrar, Registration and Stamps Department in the State of

Andhra Pradesh) of the area in which any place of business of the firm is situated or

proposed to be situated.

o Application shall contain:-

Name of the firm

Place or principal place of business

Names of any other places where the firm carries on business.

Date on which each partner joined the firm

Name in full and permanent address of partners.

Duration of the firm

o Application shall be signed and verified by all the partners or their duly

authorized agents.

o Application shall be accompanied by prescribed fee as well as the following

documents:

Prescribed Registration Form for Incorporation of a firm. (Form No.

1 and Specimen of Affidavit)

Certified true copy of the Partnership deed entered into.

Ownership proof of the principal place of business Name of the firm should not contain any
words which may express or

imply the approval or patronage of the government except where the

Government of India has given its written consent for the use of such

words as part of the firms name.

5. Under Section 59 of the Act, when the Registrar of Firms is satisfied that the

provisions of section 58 have been duly complied with, he shall record an entry of the

statement in the Register of Firms and issue a Certificate of Registration.

6. Penalty for furnishing false particulars (Section 70) : Any person who signs any

statement, amending statement, notice or intimation under this Chapter containing any

particular which he knows to be false or does not believe to be true or containing

particulars which he knows to be incomplete or does not believe to be complete, shall

be punishable with imprisonment which may extend to three months, or with a fine or

with both.

7. Any alterations, subsequent to Registration shall be notified to the registrar:-

o Change in firm name and principal place of business (Section 60)--- These

events shall require sending of a new application form along with the

prescribed fee, duly signed and verified by all the partners.

o Change relating to opening and closing of branches. (Section 61)--- When a

registered firm discontinues business at any place or begins to carry on

business at any place, such place not being its principal place of business, any

partner or agent of the firm may send intimation thereof to the Registrar.

o Change in the name and permanent address of any partner (Section 62)---

When any partner in a registered firm alters his name or permanent address, an

intimation of the alteration may be sent by any partner or agent of the firm to

the Registrar.

o Change in the constitution of the firm and its dissolution [Section 63(1)] ----

When change occurs in the constitution of the firm, any of the new, continuing

or the outgoing partner, while when a registered firm is dissolved, any person

who was a partner immediately before the dissolution or the agent of any such

partner or person specially authorized on his behalf, may give notice of such a

change to the Registrar, specifying the date thereof.

o Under Section 63(2)---When a minor who has been admitted to the benefits of

partnership in a firm attains majority and elects to become or not to become a

partner, he or his agent specially authorized in this behalf, may give notice to

the Registrar that he has or has not become a partner.

o Accordingly, the various forms prescribed under the Indian Partnership Act,

1932, for the alterations in the registered partnership firm are:-

Form No. II :- For change of principle place of business & change in

the name of the firm.

Form No. III :- For change of the other then principle place of

business.

Form No. IV :- For change of name of the partners & permanent

address of the partners.

Form No. V :- For change of constitution of forms & addition or

retirement of partner.

Form No.VI :- For dissolution of the firm

Form No. VII :- For minor partner attains the age of majority.

8. Partnership Act, 1932 does not provide for compulsory registration of firms. It is

optional for partners to set the firm registered and there are no penalties for
nonregistration.However, Section 69 of the Act which deals with the effects of non-registration
denies

certain rights to an unregistered firm. Under the Act :-

o A partner of an unregistered firm cannot file a suit in any court against the

firm or other partners for the enforcement of any right arising from a contract

or right conferred by the Partnership Act unless the firm is registered and the

person suing is or has been shown in the Register of Firms as a partner in the

firm.

o No suits to enforce a right arising from a contract shall be instituted in any

Court by or on behalf of a firm against any third party unless the firm is

registered and the persons suing are or have been shown in the Register of

Firms as partners in the firm.

o An unregistered firm or any of its partners cannot claim a set off (i.e. mutual

adjustment of debts owned by the disputant parties to one another) or other

proceedings in a dispute with a third party. Hence, every firm finds it

advisable to get itself registered sooner or later.

9. However, non-registration of a Partnership firm shall not affect:-

o The rights of third parties to sue the firm and/or its partners.

o The firms or partners in the firms which have no place of business in the
territories to which this Act extends, or whose places of business in the said

territories are situated in areas to which the act does not apply.

o any suit or claim or set-off not exceeding one hundred rupees in value which,

in the Presidency-towns, is not of a kind specified in Section 19 of the

Presidency Small Cause Courts Act, 1882 (15 of 1882), or outside the

Presidency- towns, is not of a kind specified in the Second Schedule to the

Provincial small Cause Courts Act, 1887 (9 of 1887), to any proceeding in

execution or other proceeding incidental to or arising from any such suit or

claim.

o the enforcement of any right to sue for the dissolution of a firm or for accounts

of a dissolved firm, or any right or power to realise the property of a dissolved

firm.

o the powers of an official assignee, receiver or Court under the Presidencytowns Insolvency
Act, 1909 (3 of 1909), or the Provincial Insolvency Act,

1920 (5 of 1920), to realise the property of an insolvent partner.

10. Rectification of mistakes (Section 64 of the Act)

o The Registrar shall have power at all times to rectify any mistake in order to

bring the entry in the Register of Firms relating to any firm into conformity

with the documents relating to that firm filed under this Act.

o On application made by all the parties who have signed any document relating

to a firm filed under this Act, the Registrar may rectify any mistake in such

document or in the record or note thereof made in the Register of Firms.

11. Inspection of Register and filed documents (Section 66 of the Act)

o The Register of Firms shall be open to inspection by any person on payment of

such fee as may be prescribed.

o All statements, notices and intimations filed under this Act shall be open to

inspection, subject to such conditions and on payment of such fee as may be

prescribed.

12. Grant of copies (Section 67 of the Act)

The Registrar shall on application furnish to any person, an payment of such fee as may be

prescribed, a copy, certified under his hand, of any entry or portion thereof in the Register of

Firms.