In the corporate context, “Partnership” refers to a collaborative relationship where two or more individuals decide to share the profits of a jointly conducted business, with all or any of them representing the entire group. This arrangement is typically formalized in legal terms. The degree of ownership and responsibility distribution varies and depends on specific factors. A partnership firm, therefore, enables shared ownership of a business. While establishing a partnership firm, certain rules and regulations must be adhered to. Although registering a partnership firm is not mandatory under the Indian Partnership Act, 1932, except for Maharashtra, which has made registration compulsory, you can choose to register it at any time, even years after its formation. Both registering and not registering a partnership firm have their advantages and disadvantages, akin to a coin with two sides. Below, we provide a brief overview of how a partnership firm operates and how to register one in India.

Starting a partnership is relatively straightforward, but certain conditions and limitations must be observed during the setup process. According to the Indian Partnership Act, 1932, unanimous consent of all partners is required for fundamental decisions, such as admitting new partners, dissolving the firm, or converting it. In other matters, a majority decision suffices, and profits and losses must be shared among all partners. The act also mandates a formal legal agreement. There are additional regulations outlined in the Indian Partnership Act, 1932, that must be strictly followed to prevent any adverse actions by regulatory authorities against your firm.