A2Z of Starting a Partnership Firm in India

We at Wazzeer, have written several blogs tied up to Partnership Firm, this time we thought we will take a strategic approach, to provide all information at one place. A master blog that will guide you and partners to start a partnership firm with confidence.



A partnership is an association of persons carrying business. The partners are the individuals who have agreed to share the profits of the business carried on by all or any of them acting for all.

Partnership firms have an option to register their firm with the Registrar or not, but if the partners do not have a legal contract – Partnership Deed in place, the firm is considered as Partnership at Will. If there is Partnership Deed in place, then it is called Particular Partnership.

Relationship of Partners

Major features:

  1. Every partner shall indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm.
  2. Duties and rights of partners are determined by the contract between the partners
  3. In absence of a Contract, all the partners are entitled & liable for an equal share in loss & profit in absence of any agreement
  4. A partner cannot transfer any part of the property of firm till the continuation of the partnership.


Relationship of Partners to Third Parties

Major features:

  1. A partner is the agent of the firm for the purposes of the business of the firm.
  2. The partners in a firm w.r.t contract between the partners, extend or restrict the implied authority of any partner.
  3. To bind a firm, a partner or other person on behalf of the firm shall be done or executed in the firm name or
  4. A partner has authority, in an emergency, to take up actions for protecting the firm
  5. Joint liability of partners for acts of the firm
  6. Measures to take when the act of fraud takes place


Incoming and Outgoing Partners

Main features:

  1. With respect to the Contract binding the partners, provisions regarding retirement and appointment are laid out.
  2. A retired partner is not liable to any third party who deals with the firm without knowing that he was a partner.
  3. A partner may not be expelled from a firm by any majority of the partners, it could differ only if there are respective clauses covered in the contract.
  4. An outgoing partner may carry on a business competing with that of the firm subject to contract
  5. The right of an outgoing partner in certain cases to share subsequent profits



Dissolution of Firm

Main features:

  1. Voluntary Dissolution by agreement: A firm can be dissolved with the consent of all the partners or in accordance with a contract between the partners.
  2. Compulsory Dissolution: A firm is dissolved if,
    1. by the adjudication of all the partners or of all partners but one as insolvent or,
    2. by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership.
  3. Dissolution on the happening of certain contingencies: Subject to contract between the partners a firm is dissolved
  4. Dissolution by notice of partnership at will: The firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.
  5. Dissolution by the Court. At the suit of a partner, the Court may dissolve a firm.
  6. Rights of partners post-dissolution of the firm
  7. Mode of settlement of accounts between partners
  8. Payment of firm debts and of separate debts
  9. Return of premium on premature dissolution
  10. Other restraints



Registration of Firm

Main features:

  1. Registering of the partnership firm requires the Partnership Deed
  2. Registrar if satisfied that the provision of section 58 have been duly complied with he will record an entry of the statement in a register called the Register of firms,
  3. Recording of alterations in firm name and principal place of business
  4. Noting of closing and opening of branches
  5. Noting of changes in names and addresses of partners
  6. Recording of changes in and dissolution of a firm
  7. Recording of withdrawal of a minor
  8. Effect of non-registration