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A partnership deed is a written legal document underlining the rights and responsibilities of members of a partnership. A partnership firm is not legally bound to register, however, the registration confers certain benefits which can be used to the firms advantage.

This article covers the importance of registration of partnership firms, the format and process of the same.

The Indian Partnership Act of 1932 governs partnerships in the country. The registration of Deeds of Partnership (Indian Registration Act 1908) is salient in order to promote mutual understanding and trust among the partnership members.

It stands as a testimony to the terms and conditions on which the business is founded and therefore is of grave importance in case of disputes. A deed of partnership is required to be made out and registered under the Indian Movable Property Act together with other movable properties involved.

Benefits of registration of a firm

Although it is not important for a partnership firm to be registered under the Indian Partnership Act but it is advisable to do so due to advantages that follow. The existence and transactions of the firm remain unharmed if not registered since partnership is an agreement between two or more people. However, to avail the following benefits it is important for the firm to be registered.

1. Right to file a lawsuit
Registration allows the firm to file a lawsuit against a third party. If an unregistered firm wishes to file a case, it needs to register itself under the Indian Partnership Act prior to filling of lawsuit.

2. A co-partner’s right to protection
In case of dispute between partners, an unregistered partner cannot sue its counterpart if he or she is not registered.

3. Protection of property
The property of a retired or deceased partner continues to be liable for the acts firm even after the partner’s death or retirement until public notice is served for the change to registrar. But in case of an unregistered firm, the property will be considered to charge the debts in spite of death or retirement.

4. Protection of creditors
A registered company has to keep its records up to date. This protects the creditors from evasion of liabilities on part of the partners.

5. Government facilities
Registered firms work under the rules and regulations of the government and also enjoy protection in business and production.

6. Bank credits
They receive bank credits without much hustle since registered firms strictly comply to government rules.

7. Public confidence
People lay their trust in registered companies more than unregistered companies since they fall under the government.

Rights of unregistered firms

Non registration allows the following rights to be exercised by unregistered firms:

• To bring a lawsuit of the firm’s dissolution or for settlement of accounts.
• The unregistered firm or its partners may use or claim a set-off where the subject matter of the suit does not exceed Rs. 100 in value.
• Third parties can always use a firm whether it is registered or not.

Registration process

The registration of the partnership firm can be done before starting business or during continuance of partnership. However, as mentioned earlier, for filing lawsuits a partnership firm needs to be registered. The process of registration involves two steps- filing an application and submission of required documents.

The first step the in registering a partnership firm is filing an application with the Registrar of Firms. The partnership agreement must be printed on a Non-Judicial Stamp Paper according to Indian Stamp Act 1899. The partnership agreement is usually signed in the presence of all the partners and each of the partners would retain a signed original for his/her records.

The application should contain the following information:

• The name of the firm
• The principal place of business of the firm
• The names and addresses of partners and the dates on which they joined the firm
• If the firm is started for a particular period then that period should be mentioned
• If the firm is started to achieve a specific objective then it should also be mentioned

Along with the application the following

• Application for registration of partnership in Form 1.
• ID and Address Proof of Partners like Pan Card/Passport/Voter ID/Aadhar Card/Driving License Copy of the Partners.
• Address proof of business place – if property is rented: Rent Agreement and NOC from Landlord
  - if property is one’s own: Electricity Bills or any other Address Proof.

Download the Partnership Deed Format.

Once the procedure for application is fulfilled, the Registrar of Firms makes an entry in the Register of Firms and issues a Certificate of Registration.