A general partnership is a corporate structure in which two or more people manage and operate a company in accordance with the partnership deed’s provisions and objectives.
Advantages of Partnership Firm
1. Easy to start – Partnerships firms are one of the easiest business entities to start. In most cases, you can start a partnership firm within a day.
2. More Accountability – Two individuals become partners when they believe in the business that they are planning to start. Hence, when they start a partnership firm, they have a high sense of accountability towards the firm. This results in a dedicated core team heading the business.
3. Ease of raising funds – If we compare a partnership with a sole proprietorship, then the former can raise funds in a much easier manner than the latter. The primary reason being banks and financial institutions view them favorably.
4. Sense of Ownership – Every partner owns and manages the activities of their firm. Their tasks might be varied in nature but people in a partnership firm are united for a common cause. Ownership creates a higher sense of accountability, which paves the way for a diligent workforce.
Disadvantages of Partnership Firm
1. Unlimited Liability – A partnership firm is not a separate legal entity from its partners. This means that all partners are personally liable for losses of the firm. Even if one partner causes the loss, all the other partners become personally liable.
2. Restriction on the maximum number of partners – According to Rule 10 of the Companies (Miscellaneous) Rules, 2014, a partnership cannot have more than 50 partners.
3. Lack of public faith – One of the biggest partnership firm advantages is the fact that you can start it in no time since it is not mandatory to register the firm. However, this advantage has a flip side too. The general public lacks faith in an unregistered business.
4. Dispute – A partnership firm is formed on the basis of trust and a common business goal. However, during the course of the business, if there is a dispute between the partners that remains unresolved, then the business can suffer.
Documents Required for the Registration of a Partnership
- Application for registration of partnership (Form 1)
- Certified original copy of partnership deed
- Specimen of an affidavit certifying all the details mentioned in the partnership deed and documents are correct
- PAN card and address proof of the partners
- Proof of principal place of business of the firm.