Partnership, in a layman language, refers to the coming together of two or more people to carry out a certain task. In the corporate structure of India, the Indian Partnership Act (1932) (referred to as Act hereafter), defines partnership as “the relation between two or more persons who have agreed to share the profits of a business carried on by all or any of them acting for all.” In a proprietary business an individual has constraints on the ability, skill and capital to run the business, besides liability that can occur anytime.
Any firm which falls under the category of a small or medium scale business can prevail under the partnership, as there are limited legal compliance. It is not mandatory to register as a partnership firm under the Act, but registering a firm gives the partnership a legal identity and has several advantages in case of disputes among the partners, settling claim against third party.
A partnership is governed by a partnership deed, which must be a written document duly signed by all the partners. The deed fulfills the requirement of dissipating information about the firm – name, partners’ details, nature of the business, the location of the business and others. Without much hassle to accumulate a minimum capital, two or more people can start a partnership firm, as there is no minimum capital requirement under the Act.