One of the most significant types of company formation is a partnership. In a partnership firm, two or more individuals join forces to start a business and distribute the earnings equitably. Any type of corporation, capital flow, or profession falls under the umbrella of a partnership. Contrary to corporations, a partnership business is simpler to establish and requires fewer compliance obligations.
In India, partnership firms are governed and regulated under the Indian Partnership Act, 1932. Shareholders are the people who join forces to form a partnership firm. A memorandum of understanding between the partners creates a business partnership. The agreement between the partners, known as a partnership agreement, governs their interactions with one another as well as with the partnership firm.
Suitability of the company against 3rd parties:
When some of their contractual are not honored, one or more members in a licensed partnership firm may always bring legal action. This leniency is not extended to the partners of an unauthorized firm.
Right to apply the predefined doctrine:
The partnership firm may apply the concept of plan against a private entity if it receives a summons from that entity to retrieve a debt that the firm owes to that party, provided that the latter additionally owes the cooperation firm some revenue. The value of the registered partnership obligations to the third party can simply be offset. If the partnership firm is not registered, this configuration is not possible.
Possibility of suing the company or the other partners:
A partner who works for the company where the partnership is registered can always approach the tribunals if there is ever a disagreement between the partners, between the past and current partners, or even between one of the partners and the company. This is true as long as the disagreement stems from the terms outlined in the partnership deed or concerns the powers afforded to the partner by the morality of the Partnership Act. A partner in an unlicensed firm is not granted this right, albeit he may bring a civil lawsuit against the aggrieved partners.
Improved reputation:
Although the Partnership Act makes both registered and unregistered firms legitimate, a registered partnership firm undoubtedly has a better image in the minds of prospective customers.
Conversion of capacity into an organization:
The conversion of a registered partnership firm to another corporate structure, such as a Limited Liability Partnership (LLP) or a private corporation, is always simple. An unregistered company is not granted this fluidity of conversion.
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