Registering a Partnership Firm is a popular choice for entrepreneurs coming together to build a business with shared responsibilities. It allows you to pool capital and skills while offering more flexibility than corporate structures.
To help you navigate the legalities, we’ve compiled the ultimate guide of frequently asked questions (FAQs) about drafting deeds, registration, and managing partner liabilities.
Table of Contents
Section 1: Understanding the Basics of Partnership Firms
1. What is a Partnership Firm?
A Partnership Firm is a business structure where two or more people come together to run a business and share profits as per a partnership agreement. It is governed by the Indian Partnership Act, 1932.
2. Is a Partnership Firm a separate legal entity?
No. A Partnership Firm is not a separate legal entity like a company. Partners and the firm are legally the same entity.
3. Do partners have limited liability?
No. Partners in a Partnership Firm have unlimited liability. Their personal assets may be used to settle business debts.
4. What is the difference between a Partnership and an LLP?
A Partnership Firm and an LLP differ significantly in structure, liability, and credibility. In a traditional Partnership Firm, partners have unlimited personal liability, and the firm is not considered a separate legal entity. It operates under the Indian Partnership Act, 1932 and does not have any central registration system, which often makes it riskier and less preferred for scaling or external investment.
In contrast, an LLP (Limited Liability Partnership) provides limited liability protection to its partners and is treated as a separate legal entity under the LLP Act, 2008. LLPs are centrally registered with the Ministry of Corporate Affairs (MCA), making them more structured, compliant, and credible, especially for businesses seeking growth, partnerships, or external funding.
Related Read: What is the difference between Partnership and Limited Liability Partnership?
5. What are the types of Partnership Firms in India?
- Registered Partnership Firm
- Unregistered Partnership Firm
Both operate legally, but registered firms have more legal protections.
6. Is it mandatory to register a Partnership Firm?
No. A Partnership Firm may be registered or unregistered. However, registered firms enjoy more legal rights and protection than unregistered firms.
7. What are the advantages of registering a Partnership Firm?
Registration provides:
- Ability to sue third parties
- Ability to enforce contractual rights
- Higher credibility
- Protection against partner disputes
- Easier banking & compliance
Related Read: What is a Partnership?
Section 2: Requirements, Eligibility and The Partnership Deed
8. What is a Partnership Deed?
It is a legal agreement that defines:
- Roles & responsibilities of partners
- Profit-sharing ratios
- Capital contribution
- Decision-making rights
- Admission, retirement, and removal of partners
- Dispute-resolution terms
It must be printed on stamp paper, signed by all partners, and often notarised.
9. Is a Partnership Deed mandatory?
Yes. It is the most crucial document. Without a deed, legal rights are unclear, and disputes become common.
10. Is notarisation of the Partnership Deed mandatory?
Not mandatory under law, but strongly recommended for evidentiary value and banking processes.
11. What is the validity of a Partnership Deed?
It is valid until:
- Dissolution, or
- Any terms require renewal, or
- Partners mutually amend it
12. How many partners are required to start a Partnership Firm?
Minimum: 2 partners
Maximum: 20 partners (for general business)
13. Can minors be partners?
A minor cannot be a partner, but can be admitted to the benefits of partnership with guardian consent.
14. Is there a minimum capital requirement to start a Partnership Firm?
No. A Partnership Firm can start with any amount of capital.
15. What documents are required to register a Partnership Firm?
Common documents:
- PAN & Aadhaar of partners
- Passport-size photographs
- Address proof of partners
- Proof of business address (electricity bill/rent agreement)
- Partnership Deed (most important)
Related Read: Know more about the Partnership Deed for Firms in India
Section 3: The Registration Process, Costs and Timelines
16. How is a Partnership Firm registered?
To register:
- Draft the Partnership Deed
- Pay stamp duty (state-specific)
- Notarise the deed
- Apply to the Registrar of Firms (ROF)
- Submit required documents
- Receive Certificate of Registration
17. Is it possible to convert an unregistered firm into a registered one?
Yes. You can register the firm at any time by submitting the deed and required documents to the ROF.
18. How long does it take to register a Partnership Firm?
Typically 15–30 days, depending on the state Registrar’s processing time.
19. What is the cost of registering a Partnership Firm?
Costs vary based on:
- State stamp duty (₹500–₹5000+)
- Notary charges
- Registrar filing fee
- Professional service fee
Total cost differs by state.
Section 4: Taxation, Banking and Compliance
20. Can a Partnership Firm open a Current Account?
Yes. Banks typically require:
- Partnership Deed
- Firm’s PAN
- Registration Certificate (if registered)
- KYC of partners
- GST certificate (if applicable)
21. How are taxes filed for a Partnership Firm?
A Partnership Firm files Form ITR-5. Partners file individual returns for their share of profit (tax-exempt) and remuneration received.
22. Does a Partnership Firm need GST registration?
Yes, if:
- Turnover exceeds the threshold limit
- Inter-state supply is done
- Selling on e-commerce
- Business falls in the mandatory GST category
23. Do partners receive a salary?
Yes, if allowed in the deed. Salary, interest, and remuneration to partners are allowed within Income Tax limits.
24. What are the annual compliance requirements?
- Income Tax return (ITR-5)
- GST filings (if applicable)
- TDS returns (if applicable)
- Maintenance of books of accounts
Registered firms may have minor additional state requirements.
25. Is an audit mandatory?
Audit is required only if:
- Turnover exceeds ₹1 crore (business)
- The Income Tax Act requires it
GST audit is applicable based on turnover thresholds.
26. Do Partnership Firms need a digital signature (DSC)?
Not mandatory unless dealing with:
- Online GST filings
- MCA filings (for conversions)
- Government tenders requiring DSC
Related Read: Partnership Firm Tax Rate and Tax Return Filing explained
Section 5: Operations, Lifecycle and Dissolution
27. Can a Partnership Firm have branches in multiple states?
Yes, but you may need:
- Additional Shop & Establishment registrations
- State-specific trade licenses
- Branch-wise GST registration (if applicable)
28. Can a partner leave or be removed?
Yes, if permitted in the deed. Exit or removal must be in accordance with the terms of the agreement.
29. What happens to the firm if a partner dies?
Unless stated otherwise in the deed, the firm dissolves. Many deeds include clauses allowing continuation with the remaining partners.
30. Can a Partnership Firm be converted into an LLP or a Private Limited Company?
Yes. A Partnership Firm can be converted into:
- LLP (most common)
- Private Limited Company
Related Read: Difference between a Company and a Partnership
31. Can a Partnership Firm be dissolved?
Yes, through:
- Mutual consent
- Expiry of term
- Completion of the project
- Death or insolvency of a partner
- Court order
A dissolution deed is recommended.
Private Limited Company
(Pvt. Ltd.)
- Service-based businesses
- Businesses looking to issue shares
- Businesses seeking investment through equity-based funding
Limited Liability Partnership
(LLP)
- Professional services
- Firms seeking any capital contribution from Partners
- Firms sharing resources with limited liability
One Person Company
(OPC)
- Freelancers, Small-scale businesses
- Businesses looking for minimal compliance
- Businesses looking for single-ownership
Private Limited Company
(Pvt. Ltd.)
- Service-based businesses
- Businesses looking to issue shares
- Businesses seeking investment through equity-based funding
One Person Company
(OPC)
- Freelancers, Small-scale businesses
- Businesses looking for minimal compliance
- Businesses looking for single-ownership
Private Limited Company
(Pvt. Ltd.)
- Service-based businesses
- Businesses looking to issue shares
- Businesses seeking investment through equity-based funding
Limited Liability Partnership
(LLP)
- Professional services
- Firms seeking any capital contribution from Partners
- Firms sharing resources with limited liability











