Procedure for Registration and Dissolution of a Partnership Firm

Kalpana Borjha | Kalinga University | 21st June 2020

Introduction: 

Partnership is 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. Persons who have entered into a partnership with one another are individually called Partners and collectively known as a Firm. To establish and run a partnership firm, it is necessary to be registered under the Indian Partnership Act, 1932. Its procedure is easier and simpler than to form a company.

Procedure for registration of a Partnership Firm: 

A simple procedure is required to be followed to get a firm registered under the law:-

• Choose a name: All businesses need their unique name to represent themselves before the public. It cannot be the same as an already registered firm or company. Check whether or not the name has been taken by another company/firm. Also, choose a unique domain name and trademark for the firm and get it registered to keep others from misleading the public with similar names.
• Draft a Partnership Deed: The partnership deed elaborated on the rights and duties of each of the partners in the firm. At a minimum, it consists of— name and address of the firm, name, and address of partners, nature of the business carried out, duration of the partnership, capital contribution by each partner, profit sharing ratio of each partner.

Other than the basic details, the deed also consists of some additional clauses depending upon the desire of the partners or requirement. These clauses may be—

1. Procedure to admit a new partner.
2. Commissions/ salaries payable to partners.
3. Powers and responsibility of each partner.
4. The interest of the partner’s capital contribution.
5. Audit procedure.
6. Retirement procedures.

The partnership deed is drafted on a stamp paper in proper format and is signed by each partner in front of a notary to validate it legally. One is also required to pay taxes for the partnership firm thus a PAN card is also a requirement for the partnership firm.

• Complete the registration application which includes all the basic details about the firm and the partners. It must be duly signed by each partner. Submit the application and pay the required fees to the Registrar of Companies to complete the registration process. A partnership will not be registered until all the fees and duties are paid.
• The Registrar reviews the application and the necessary documents attached to it and if everything is alright, the certificate of registration is issued within a week.

Procedure to dissolve a Partnership Firm: 

In legal terms, the closure of a firm is known as the dissolution of the firm. As per the Indian Partnership Act, the dissolution of the partnership between all the partners is called the dissolution of the firm. Following are the ways to dissolve a partnership firm:-

• Dissolution by Mutual Agreement: This is the easiest way to dissolve a partnership firm. If all the partners give consent to dissolve then the partnership firm may be dissolved. Partners can also enter into an agreement to dissolve the partnership firm.
• Compulsory Dissolution: A firm may be dissolved if it ceases to be lawful, due to happening of any event which is unlawful for the firm to continue the partnership or the business. A firm may also be dissolved by an adjudication of all the partners or insolvency of a partner.
• Dissolution in contingencies: A firm is dissolved after the expiry of the term, if constituted for a fixed term, by the sudden death of a partner, if it constituted to carry one or more adventures and undertakings by the completion.
• Dissolution by notice of partnership at will: A partner may give notice in writing to other partners about his intention to dissolve the firm, only if the partnership is at will. In such a case the firm will be dissolved from the date mentioned in the notice as the date of dissolution. If no date is mentioned in the notice a date should be communicated for the dissolution of the firm.
• Dissolution by the court: The court may dissolve a firm if a partner files a suit or the same, on the grounds that if a partner becomes unsound, permanently incapable of performing his duties as a partner if a partner is guilty of conduct which may affect the business and the firm if a partner transfers his interest in the partnership firm to a third party, or any other ground which is just and equitable for the firm to be dissolved.

Responsibility after Dissolution: 

The partners are not liable for any transaction or other such responsibility after the dissolution of the partnership firm, but liable for transactions before the dissolution of the firm. 

Conclusion: 

Although the registration of a partnership firm is not necessary for India registration provides it a legal existence and it is easier to convert it into other entities like LLP or a company, etc. later.