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Basics of Partnership in India

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Basics of Partnership in India

Partnership is a form of business wherein two or more partners manage and operate the business to achieve a common goal and share profit and losses. It is the most easy and inexpensive form of doing business in India. Each partner is personally liable for the debts of the partnership. The financial burdens of operating a business are shared between partners. Partnership Firm can be created by drafting a Partnership Deed and can start a registered and un-registered Partnership Firm.


a. Partnership deed may be written or oral.

b. There should be atleast 2 partners to form a partnership.

c. Every partner act as an agent of another partner.

d. It has no legal entity, if partnership is not registered.

e. Partnership business can be carried on by all the partners or any one of them for all.

f. Every partner contributes his Share Capital.

g. Liability of each partner is unlimited.

h. It can be registered or unregistered partnership firm.


a. Simple Formation

A partnership is easy to form without much complex legal formalities and requires very little paperwork. A partnership may be formed through an oral agreement, although a written registered agreement is easier to prove in court.

b. Sufficient Capital

A partnership firm has two or more partners, the ability to raise funds is more because all partners may contribute more funds and their borrowing capacity may be greater. So in simple term, more partner more fund availability.

c. Minimum Capital Requirement

As per the provision of the Indian Partnership Act, There is no such minimum capital requirement for formation of partnership. So it can be formed with Rs. 5,000 or with Rs. 5,00,00,000/-.

d. Filing of Annual Accounts

As per the provision of the Indian Partnership Act, a partnership firm is not required to file any annual accounts with the ROC or registrar of partnership firm annually.

e. Sense of Responsibility

Partners have unlimited liability, so every partner performs his duties honestly.

f. Taxation

Every partner pays tax individually. Each partner must include his business income in his personal tax return and deduct business losses on his individual tax return as well.

g. Secrecy

In partnership there is no requirement to publish annual accounts, so the business secrecy remains with the partners.

h. Minimum Alternate Tax (MAT)

There is no liability of partnership towards MAT.

i. Dissolution

Partnership business can be dissolved easily as there are no legal restrictions.


Hope we had helped you to understand basics of the Partnership in India, in case you still have any doubt or need any clarifications, then please feel free to contact us at complianceship@gmail.com or +91-8010233173 or visit our website www.complianceship.com
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