Formation of Partnership Firms / Trusts / BOI / Associations - Canest


According to Sec 4 of the Partnership Act 1932, “Partnership is the relation between 2 or more persons who have agreed to share profits or losses of a business carried on by all or any them acting for all”.

Persons who have entered into a partnership with one another are called individually ‘Partner’ and collectively a ‘firm’

A Partnership Firm is a business entity that is controlled by an association of people. The sole purpose of forming a partnership firm is to make profits. In a partnership firm, the partners share the liability of profit and loss of the company. Indian Partnership Act 1932 is the law that governs the partnership firm in India.

A partnership deed is an agreement between the partners in a partnership firm which states the rights, duties, profits, shares and other obligations of each partner.

The following are the essential characteristics of the partnership deed registration:
  •  The agreed name of the Partnership firm.
  •  Nature of business
  •  Date of commencement of business
  •  Principal place of business
  •  Contribution of capital from Partners
  •  Name and details of partners
  •  Rights and duties of each partner
  •  Salaries, commissions or any other amount to be payable to partners
  •  The process to be followed in case of bringing any new partner or retirement of partner or death of partner or dissolution of the partner.
  •  Any other clauses as partners may decide on their mutual understanding and discussion.


  •  Minimum number of partners required are two
  •  No minimum capital required
  •  Maximum number of partners is 10 in case of Banking business
  •  For other businesses, the maximum number of partners required is 20.
  •  Minor cannot be a partner
  •  Only Indian citizens can become partners.


There are two types of Partnership firms, one is a Registered Partnership and Unregistered Partnership. The only criteria to start and execute the partnership business is via Partnership deed, it does not require to be registered. There are many Partnership businesses that exist as an unregistered firm.Registered Partnership – Partners need to execute the agreement known as Partnership deed and stamp duty needs to be paid based on the state act, such deed executed and an application along with the prescribed fees is submitted to the Registrar of Firms of the state.Unregistered Partnership – Partners execute the deed and start the business without submitting or registering it in the Registrar of firms.The consequences of not registering the firm are as follows:
  •  The firm cannot file the legal proceedings against any third party in any situation with respect to any dues to be paid to the firm.
  •  Unless the firm is not registered the partner cannot sue for any legal action on the existing partners or on the third party from the agreement.

Steps to register a Partnership firm

  1. Selecting a suitable name for the firm
  2. Drafting of the partnership deed
  3. Finalisation of the partnership deed.
  4. Application for registration
  5. Submission of the application
  6. Stamp duty fee
  7. Registration Certificate
  8. PAN application

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