‘Partnership’ is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all, is defined under section 4 of Indian Partnership Act, 1932. Partnerships are governed by Indian Contract Act, 1872 and Indian Partnership Act, 1932. Two or more persons may form a partnership form of business by registering themselves with Registrar of Firms.
Partnership Firm form of business offers various advantages like Easy to form, Sharing of Risk, Lesser Legal Formalities, etc. But the major disadvantage of partnership form of business is its ‘Unlimited Liability’. Partners are liable for the debts and liabilities of the firm, i.e. partners personal property can be attached for the payment of debts and loans of Partnership Firm. Therefore, Company form of organization is sometimes preferred over it.
Section 11 of Partnership Act 1932 states that the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be express or may be implied by a course of dealing. Mostly, a Partnership deed is entered between partners which regulate relations between partners by providing for:
(a) the firm-name,
(b) the nature of business of the firm,
(c) the place or principal place of business of the firm,
(d) the date when each partner joined the firm,
(e) the names in full and permanent addresses of the partners, and
(f) the sharing of profits/losses, remuneration, interest, etc.
Partnership Deed is the most important document from the point of view of Partnership form of organization. Partnership Firm is registered by filing Form No 1 with affidavit, Partnership Deed and ownership proof of principal place of business with Registrar of Firms.