A Partnership is a business structure where two or more persons come together to run a business and share profits and losses as per an agreement.
| Feature | Details |
|---|---|
| Ownership | Two or more partners (max 20 for general, 10 for banking business) |
| Liability | Partners have joint and unlimited liability (except in LLP) |
| Registration | Registration is optional but recommended |
| Taxation | Partnership firm is taxed separately at a flat rate of 30% plus surcharge & cess |
| Management | Managed by partners as per partnership deed |
| Profit Sharing | As per the partnership agreement |
| Continuity | Ends on death, insolvency, or retirement of a partner unless otherwise agreed |
Easy to form and operate with multiple owners
Shared responsibility and skills
More capital and resources than proprietorship
Flexibility in management and operations
Unlimited liability for partners
Potential for disputes among partners
Limited life of the firm (unless otherwise agreed)
Difficult to transfer ownership
Choose a firm name
Draft a Partnership Deed (recommended) detailing rights, duties, profit sharing, etc.
Register the firm with the Registrar of Firms (optional but provides legal benefits)
Obtain PAN for the firm
Open a current bank account in the firm’s name
Apply for other registrations (GST, Import Export Code, etc.) as applicable
Taxed as a separate entity at 30% plus surcharge and cess
Partners are taxed on their share of profit in their individual returns (profits exempt from tax to partners)
Firms must file ITR-5 for income tax return
