Company Formation


Partnership firms in India are governed by the Indian Partnership Act, 1932. As per the section 4 of the Indian Partnership Act. Partnership is the relation between the persons who have agreed to share of the all business profit and loss.
Two or more persons who have entered into partnership with each other to carry on a business are individually called PARTNERS collectively called as a Partnership Firm; partnership firm is not a separate legal entity. It is merely a collective name given to the individuals composing it. A firm cannot possess property or employee servants; neither can it be a debtor or creditor. It is only for the sake of convenience that in commercial usage likes "property of firm", "employee of firm", and "suit against the firm" so on are used, but in the eyes of the Indian law that simply means "Property of the partners", and a suit against the partners of the firm.

Advantages of Partnership Firm:
 Registration is not compulsory in the case of Partnership firm. It can be formed without any legal formality and expenses. Thus they are simple and economical to form and operate.
 Business of a partnership firm is very well managed by all the partners as they take interest in the daily affairs of business because of the ownership, profit and control.
 Due the more number of members the partnership firm has larger resources for the business operations as compared to sole proprietorship.
 Due to the limited number of partners there is flexibility in the operations of business as the partners can amend any objectives or change any operations any time by mutual consent.
 In partnership every partner bears the risks individually as it is easier compared to sole proprietorship.

Disadvantages of partnership Firm:
 Liability of every partner in a partnership firm is unlimited as any of the partners may be called upon to pay all the debts even from its personal properties. A single wrong decision by one partner can lead other partners in heavy losses and liabilities.
 According partnership agreement every partner has equal rights. Some situations might occur in which one or the other partner will not agree on the same thing which will cause difference of opinion resulting mistrust and disharmony among the partners.
 A partnership firm does not exist for an indefinite period of time. The death, insolvency or lunacy of a partner may lead to dissolution of the partnership firm.
 Due to the restriction on the maximum number of members, a limited amount of capital can be raised.
 A partnership firm does not have a legal status like a Company.