A partnership firm is best for small businesses that plan to remain small. Low costs, ease of setting up and minimal compliance requirements make it a sensible option for such businesses. Registration is optional for General Partnerships. It is governed by Section 4 of the Partnership Act, 1932. For larger businesses, it has lost its relevance with the introduction of the Limited Liability Partnership (LLP). This is because an LLP retains the low costs of a partnership while providing the benefit of unlimited liability, which means that partners are not personally liable for the debts of the business.

The partners in a partnership firm are the owners, and thus, are not separate entity from the firm. Any legal issues or debt incurred by the firm is the responsibility of its owners, the partners.

A partnership must have at least two partners. A partnership firm in the banking business can have up to 10 partners, while those engaged in any other business can have 20 partners. These partners can divide profits and losses equally or unequally.

No, registration of a partnership is not necessary. However, for a partner to sue another partner or the firm itself, the partnership should be registered. Moreover, for the partnership to bring any suit to court, the firm should be registered. For this reason, it is recommended that larger businesses register the partnership deed.

The deed should contain names of the partners and their addresses, the partnership name, the date of commencement of operation of the firm, any capital invested by each partner, the type of partnership and profit-sharing matrix, rules and regulations to be followed for intake of partners or removal.