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What is a Partnership Firm?

A Partnership Firm is one of the types of business models which is governed and regulated by the Indian Partnership Act, 1932. This business structure basically requires two or more individuals to manage and operate a business according to the terms, conditions, regulations, and goals decided in the Partnership Deed. Further, it is noteworthy to note that the Partnership Deed is considered the Magna Carta of the Partnership Firm and all the details, specifications, roles and responsibilities of each Partner, profit sharing ratio, nature of the work, etc., are embedded in the Partnership Deed itself.

Benefits of Partnership Firm Registration

The following listed are the benefits of Registration of a partnership firm:

Decision Making: In a Partnership Firm, decision-making could be faster as there is no concept of passing resolutions. All the partners in a Partnership Firm enjoy a variety of powers & in most cases, they can engage any transaction on behalf of the firm without the consent of other partners.

Easy to Start: Partnership Firms in India are easy to start and the only requirement for starting a Partnership Firm in most instances is a Partnership Deed. Therefore, a Partnership can be started on the same day.

Raising of Funds: A Partnership in India can easily raise funds and multiple partners make a more feasible contribution. Moreover, banks also view a Partnership Firm more favourably while sanctioning credit facilities instead of a Proprietorship Firm.

Less Compliances: The Partnership Firm in India has to follow very few compliances as compared to an LLP or a company. The partners don't require a DSC (Digital Signature Certificate) or DIN (Director Identification Number), which is required for the designated Partner or directors of an LLP. The Partners do have legal restrictions on their activities, and it's cost-effective, and the Registration is way cheaper than a Company or LLP.

Sharing of Profits & Losses: The partners share the profits & losses of the Firm equally. The turnover of the Firm depends on their work; they have a sense of ownership & accountability. Any loss of the Partnership Firm will be borne by them equally or as per the Partnership Deed Ratio, lessening the burden of loss on one Partner or person. They are liable together and severally for the activity of the Firm.