Partnership Firm
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A partnership Firm is a form of business when two or more person join hands together are called...

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Partnership Firm

A partnership Firm is a form of business when two or more person join hands together are called partners for operating business by contributing capital and agreed in terms of business under ‘partnership deed’ is called partnership firm. It can be governed by Partnership Act 1932.

Features
  • Liability of partners is unlimited.
  • Profit/loss equally or as per partnership deed shared by partners.
  • More capital available as partners increase then they contribute capital it tends to increase in funds.
  • Partnership firm is formed by an agreement (either written or, oral) agreed by all partners.
  • In partnership firm no partner transfer its shares or right to any other partner without consent of all partners.
  • In partnership firm there exists a principal agent relationship as every partner act as agent and represents its firm and all other partners for business transaction.
Advantages
  • Risk under partnership is less as risk is borne by all partners not by a single person as in sole proprietor.
  • Tax rates on partnership firm are relatively lower than any other form like company or, sole proprietor.
  • If partnership firm is “registered” than it can be register as a start up and enjoy the benefits provided by Indian government.
  • In partnership firm there can be a variety of partners(it is not restricted to capital) like one who have skills but not have capital and other who have capital but not have skills so, on mutual understanding of them they can be partner and form partnership firm.
Disadvantages
  • Liability of all the partners is unlimited it may lead to risk of personal assets of partners if they can’t pay their debts.
  • There may be chances of delay or, no policy formulation if there is a conflict between partners.
  • Each partner work as agent and so, on behalf of whole any partner may take decision and if a wrong decision taken by an incompetent partner it binds all other partners and risk can be borne by all partners.
  • In Partnership there can always a risk of dissolution In case of withdrawal or death of a partner.

Required Documents for Partnership Firm

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