The (LLP) limited liability partnership is an upgraded version of the Partnership. The Limited...
In India, it is not compulsory to register a partnership deed. However, there are several reasons for registering your partnership firm. One should register its partnership deed because an unregistered entity has several restrictions with respect to legal enforcement of the partnership deed, so it is better to get your partnership deed registered.
A Partnership Firm is a very popular firm of the business constitution. These are the businesses that are owned, managed and controlled by an individual or group of individuals to carry on the profit of the business. In small and medium-sized businesses partnership firms are very popular and relatively easy to start.
Because of its simplicity, a partnership firm is one of the most preferred means of starting an e-commerce business. To start a partnership firm you just have to enter into an agreement on various matters like profit & loss sharing ratio and put it on papers, then it is signed by both the parties then your business is started. An unregistered partnership has to suffer following disadvantages:
A partner of an unregistered firm cannot file a suit against the said firm or any of its partner to enforce any of its right arising from the contract. It also includes the right conferred by the Partnership Act unless the partner’s name is entered into the Register of firms as a partner in the firm.
For Egg: If your agreement is unregistered then you cannot even withdraw the amount that you have invested, if the partners do not agree to allow you to withdraw the capital you have invested you cannot even take them to court, because of the reason that your firm does not have a valid agreement. An unregistered agreement that was made at the time of starting the firm will not be enough.
An unregistered firm cannot file a suit against any third party to enforce a right arising from a contract, this suit will not be valid. Any suit filed by an unregistered firm shall not be valid unless the firm registers itself and person suing on the behalf of the firm have been shown in the Register of Firms as partners.
Proprietorship Firm and the Partners of an unregistered firm cannot claim a set-off i.e. mutual adjustments of debts owed in a dispute with a third party.
It is not necessary that your partnership deed has to get registered when your business is formed. The deed can be registered at any time through an application with the Registrar of Firms that has jurisdiction where the firm is situated or proposed to be situated.
Every deed is not same, the partnership deed made is customized, and it is made to protect your business interest. However, there are some essential clauses which are included in every deed which are:
The capital contribution of each partner needs to be defined against his name and the essential expenditure that shall be done. If it is an equal capital partnership, the same shall be mentioned in the clause.
One can put many other clauses so that it will help in predetermining future plans, and will also make it legally binding.