An analysis of the methods used to register

partnership firms under the Indian Partnership Act

of 1932

Third Semester B.A.LL.B.

Instructor: Miss Yashshwini Singh
Akanksha
University, Roll No.
 DECLARATION

We hereby certify that the project is Siddhartha Law College, Dehradun. The study
submitted by Akanksha on how to register a partnership company under the
Partnership Act of India, 1932 partially fulfills the requirements for conferring a BA
LLB degree. A true account of the work we have done under the guidance of
Professor Miss Yashwini. I have not submitted this topic as an assignment to any
other university or educational institution. degree.

Akanksha

(Univ. roll number)

I hereby attest that, to the best of my knowledge, the aforementioned claim made by
the candidate is true.

Guide Name

Name of the Guide:

 ACKNOWLEDGEMENT

Respected Yashshwini Mam, My distinguished professor and our distinguished

Director, Sharafat Ali, has published this paper on the subject'' Study of Registration
Arrangements of Partnership Enterprises under the Indian Partnership Act, 1932''. It
has given me a wonderful opportunity to write. Working under his direction, I learned
quite a bit about the project. Thanks to his advice and guidance, I was able to
complete this task. Finally, I would like to thank his parents and friends, who
supported me throughout this project and gave me valuable advice.
 The 1932 Act on Indian Partnership

Introduction

A partnership is one of the most important types of business organization when two
or more people come together to do business and split the earnings from that
location in a quantitatively agreed-upon manner. In contrast to firms, partnerships
are easier to form and have lower compliance rates. 1

A partnership firm can be created when two or more people join forces as partners;
this type of business is also controlled by the Indian Contract Act.

Every partnership firm is not needed to register under the Partnership Act. However,
an unregistered company has several disadvantages. Few partnerships would
therefore think that staying unregistered in the application is best.

Until the last century, disputes between business partners were decided by courts
according to custom and law.
However, the Indian Contract Act of 1872 contained a partnership clause.
As India`s trade grows, a partnership is defined as a relationship or agreement
between two or more of its people who agree to share an acting ambassador.
Partnership law in India is primarily based on the British Partnership Act of 1890. 2

Partnership Law is based on Chapter 11 of Indian Contract Law which includes

Sections 239 to 266.
The Partnership Act came into force on October 1, 1932, except for SS69.
Partnership laws are not legally binding.
Some provisions are contained in Indian contract law. Based on the Ad Hoc
Commission's recommendation, the India Partnership Act has been introduced into
Parliament.

1
Investopedia.com
2) Americanexpress.com
 INDEX

S.NO. CONTENT SIGNATURE

1 INTRODUCTION

2 Partnership: An Overview
and Definition

The Basics of a Partnership

3 The Basics of a Partnership

A Partnership's number of
partners

4 Partner Agreement

Important Characteristics of
a Partnership

5 The procedure for

registering

Alteration of information

6 challenges each trade

association faces

7 Conclusion

Partnership: An Overview and Definition

A partnership is described in Section 4 of the Indian Partnership Act as "the relation
between persons who have agreed to get the profits in a business carried on by any
one of them acting for all."

In partnership businesses, two or more individuals join forces to operate a business

take profits and split those revenues. Together, the partners pool their capital and
work to run the company. A partnership must be created for a legitimate ate
business, as stated in section 12 of the Indian Partnership Act. The possession of
property with another person is not a partnership. 3

The Basics of a Partnership

To operate the firm, there must be agreement among the partners.

Gaining revenues and distributing them among the partners must be the goal of
establishing the company. Unless otherwise stated, the partners will all share equally
in the profits and losses, according to the share of capital that each partner has
contributed.

The partnership agreement must state that the business will be run jointly by all or by
someone acting on their behalf. A mutual agency exists between the partners,
following Section 13 of the Companies Act of 1932. Each member of a partnership
serves as both the principal and the agent for the other members. All other partners'
activities are bound by the decisions made by one partner.

Unlimited Liability: All debts owed by partners may be paid in full by them.

stable debt. Their infinite responsibility from the sale of company assets extends to
their assets.
A Partnership's number of partners
There is no maximum number of partners permitted in a partnership under the Indian
Companies Act, however, there must be a minimum of two partners. However, the
maximum number of partners in a partnership cannot be more than 100 as per the
Companies Act of 2013. A partnership is referred to as a non-statutory partnership
under Section 464 of the Companies Act 2013 if it has more than 100 members. The
maximum number of partners for banking and other purposes is 10 under Section 11
of the Companies Act.
A partnership can be initiated without a verbal or written agreement. When there is a
written agreement between partners, it is called a partnership agreement. Partners
agree to the purpose and rights and obligations of the partnership.
A partnership divides profits or losses between the partners. They are responsible
for filing and paying taxes on a portion of the partnership's profits. 4
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 Partner Agreement

The foundation of the Association is the Association Agreement. To conduct the

operations of the partnership firm, it serves as the foundation for establishing a legal
connection between the partners. The partnership agreement may be expressed
verbally or in writing, but when it is written, it is referred to as a partnership contract.
Some of the information listed in the association contract includes the following.

along with the company's name, address, and those of the linked company.

Each partner's name and address

Partners' rights, obligations, and responsibilities

The ratio of profit and loss

Each partner makes a capital contribution.

The interest rate on the capital, loans, drawings, and account settlement will be
determined in the event of the company's dissolution

Students in the trade stream learn a lot about the Indian Association Act of 1932. As
a part of the Class 12 NCERT ledger, the Indian Companies Act of 1932 was
introduced. Based on the idea of corporate partnerships, this act has three to four
chapters. These chapters are particularly significant since they are heavily weighted
in the Class 12 board exam and because they are relevant to knowledge and impact
because they will keep those interested in starting a business on their toes. Because
they will be aware of all the relevant legal aspects. 5

The company is defined under the Indian Companies Act, of 1932, as "a relationship
between persons who have agreed to share in the profits of the firm undertaken by
all or any of them acting for the benefit of all."

Partners, who collectively make up a firm, are individuals who willingly joined into a
partnership while being aware of all other pertinent information. They settle on a
particular name, referred to as the firm name, under which the task will be
performed. Other than the partners who make up the partnership, there is no other
independent legal body.6
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6) Americanexpress.com
 Important Characteristics of a Partnership

The firm must have two or more partners with a personal stake in a shared objective
for two or more persons working there. A maximum number of partners that a
company may retain is specified by the central government under Section 464 of the
Companies Act 2013 (the Act). As a result, the central government claims that a
company can have no more than 50 partners.

Legal Agreement: When partners join together to start a business, they do so with
the understanding that earnings and losses will be distributed evenly among them.
Although these agreements can be established verbally and legally binding, it is best
to put them in writing to prevent misunderstandings later.

Business Partners: To qualify as business partners, a current line of business must

exist within the company; only then can the Indian Partnership Act of 1932 be
applied to them.

Mutual Accords The Mutual Agency must be jointly agreed upon to create a
partnership. The firm's partners have the authority to establish the rules, bind the
other partners to abide by those rules, and also to follow the guidelines established
by their fellow partners. Each partner is free to make decisions and handle company
affairs as they see fit.7

The procedure for registering

The signup process is quite easy. The Registrar of Companies in the state where
any location of the firm's operation is located or is intended to be located must
receive an application of the required kind and the required fee.

The request or declaration must be in writing, be signed by all of the partners or by

their specially designated proxies, and include the information below:
the organization's name.
The main location or locations of the company's operations.
Names of additional locations where the company is active.
Whenever a partner first entered the partnership.
The partners' full and official names.
the firm's timeframe.

When the Registrar is certain that the aforementioned terms are being followed on
the expiration date, he will record the declaration in the Mercantile Registry, which is
a registry of surpluses (article 59). The registration process is now finished. 8
4

Alteration of information

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8) Findlaw.com
If any of the aforementioned data changes while you are reading the Commentary of
the Registrar of Companies statement with new information about the company, you
must tell the Registrar, who will then include the necessary correction in the
Companies Register.

The Registrar must also be informed when a Member retires, gets expelled, loses
their job, passes away, or when a replacement or minor Member is accepted and
decides to join the organization after acceptance. They must also be informed when
the firm dissolves. (sec 60-63)9

What year was the company registered?

A firm is deemed to be registered under the terms of Article 59 when the Registrar is
satisfied with the accuracy of the application submitted under Article 58 and the
declaration is recorded in the register known as the Mercantile Registry.

Proof of Registration

According to Rule 9 of the Indian Companies Act, a Certificate of Registration

endorsed by the Registrar is acceptable as notarized proof of registration or
incorporation.

Business Name

Anytime one of the streamlined details is modified, the Registrar of Companies must
be notified and the Register must be appropriately updated. The required method
and rate are used to send the change that has to be made. The Registrar receives
the following revisions or alterations: any alterations to the company name. 10

The primary location of commercial transactions has not changed. Almost any name
or primary place of business transaction change necessitates the creation of a new
record. All partners must sign these adjustments and send them conditionally.

when a new partner is introduced to the firm or when the partnership agreement is
modified, such as when an old partner retires.

any alteration to the member's name or official or home address.

It is up to the minor partner's choose whether or not to become a partner once they
have attained adulthood.

when the company may be dissolved.

5

The benefits of registration

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10) Mca.gov.in
The company is registered for the benefit of both the company and the people who
do business with it. The following advantages are acquired with the firm's
registration:

I Advantages for the company

In civil cases, the company is granted unrestricted access to pursue its claims
against third parties. The firm cannot bring legal action against external partners if it
is not registered.

Interest paid to creditors

Any partner may be hired by the creditor to collect the money the company owes.
Every partner whose name appears in the register is individually liable for the
anonymous. Therefore, creditors have the right to seek payment from any firm
partner.

(3) Rewards for participants

In the event of a dispute between the partners, either party may make a legal aid
application to a court. Partners might also turn to other parties to recover their money
back.
(4) Advantages for prospective partners

If the partnership is registered, the new member may compete for his share of the
business. You will have to rely on the other partners' reputations if the company is
not registered.
Benefits of associated partners abroad, point five
External partners benefit from company registration in many different ways. Two
types of external partners can be distinguished:

Following the passing of the partner,

(2) The pension plan for the partner in retirement.

When a partner passes away, his heirs are not responsible for the debts the
company incurred after his passing. Annuity partners are still responsible up until the
point at which they fail to publish notifications. The public notice expires after its
publication date and is not registered with the Registrar. As a result, to use this
feature, a firm must register.
challenges each trade association faces.11
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1) Issues with associations
potential weaknesses are present in every association. We all recall when Enron
recognized that the partnerships they had created were being abused, exaggerating
the firm's financial reporting, which depositors and thousands of Enron workers rely
heavily on to buy or sell their stock. These partnerships destroyed the company's
public safeguards and caused Enron to go bankrupt. These partnerships were
addressed by other significant accounting problems.

The second obligation

Typically, partners bear full responsibility for the actions of their other partners. All
general partners are liable for any fatal error that a general partner discloses, as well
as any ancillary debt or other liabilities that emerge from that error.

3) Increase in capital
Because all joint partners have unlimited responsibility, general partnerships find it
challenging to raise funds. Investors may find an LP or LLP more appealing because
it enables a limited partner to engage without taking on any risk. The limits of LPs
and LLPs must be taken into account, as was mentioned before. LPs and LLPs are
also wealthier than regular partnerships.12

4) Guard your social contract.

The advantages of forming a partnership are numerous, and any differences will be
resolved. If the partnership does not succeed, the legal agreement should also
specify how partners can be deducted from their contributions, how new partners will
be admitted to the partnership, or what actions would be taken if the partnership
wanted to be suspended.13
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ADVANTAGES AND DISADVANTAGES

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13) Mca.gov.in
ADVANTAGES:

A partnership has to be set up and arranged. Partners sign a partnership agreement

and start the industry. According to credit bosses, the partnership is grateful for the
resurgence of scale. The commitment of each partner in the association is great, so
financial partnerships can be carefully considered before proceeding to the
organization. Partnerships can convey additional benefits for the company through
the partners’ joint efforts. Partnerships are typically in focused areas to procure
resources and build a business. Registered company salaries are split between
partners after paying super costs. They pass the cost of the salary offer onto the
organization. Partnerships may also be formally dissolved subject to mutual consent
of the partners or agreement of the partners, barring any uncertainty. 14

DISADVANTAGES:

One of the fundamental flaws of partnerships is that the partners are solely and
jointly responsible for the company as a whole. The timing of partnerships is always
uncertain. A partnership ends when a partner dies, is abused, retires, sells an
advantage, or a new partner joins the business. Partnerships raise payroll abuse by
partners. If there is a difference in partners, there may be delays in check-in
procedures. This may be the reason for the incompetence. 15
8

Conclusion
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In conclusion, it can be observed that the fundamental idea of society and the laws
that govern it need to be examined since the vestiges of colonialism must be
polished to accommodate our social reality, which necessitates a look at our social
media. the truths. Division of labour leads to increased inefficiency of work between
different partners.
Division of labour leads to increased inefficiency of work between different partners.
So, in my opinion, a partnership is a more decent way of working together than an
organization claimed by one person.
In complex organizations, limited liability organizations have replaced partnership
companies, but partnerships are still preferred by professionals and a few exchanges
and business companies in India and abroad.

A partnership is perhaps the most established type of business relationship. In

complex organizations, limited liability organizations have replaced partnership
companies, but partnerships are still preferred by professionals and a few exchanges
and business companies in India and abroad.