Everything in this world is replaced by a better alternative. That’s how the world moves forward. In terms of anthropology, the homo-erectus species were replaced by the homo-sapiens because the latter effectively survived the environmental changes on the planet more than the former. Men were replaced by the much more efficient and cost-effective machines in the industrial revolution. Radios were replaced by FMs, cables towers were replaced by Satellites and Telephones by mobiles, mobiles by smartphones, and so on.
Talking in terms of business, the single ownership of a business entity, i.e. inception, operation, direction, management, and maintenance, everything is done by a single individual also turned out to be less productive. Therefore, in the early 1900s, the world came up with a different and better solution to conduct their business operations more effectively. Multiple members sharing same vision to produce a commodity(s) and/or service(s) came together to form an organization to conduct their business activities. This form of setup for conducting business operations is known as a Partnership Arrangement. These partnership arrangement has been used by the different forms of organizations in the world. It has proved its usefulness over the decades.
This special arrangement of partnership among two or more individuals allows them to conduct their business activity efficiently and likewise distribute the profits among them, or incur the losses suffered by their business setup.
In India, the legal structure of the constitution allows you to register your partnership arrangement and make it into a partnership firm registration or partnership company. The member partners of a partnership arrangement can apply and register for a legal permit or say a license to conduct themselves as a legal entity in the market and commence their business operations. This partnership arrangement is defined in a composed or oral form of listed regulations which contains the
Such a set of regulations put forth by the member partners and mutually agreed upon is called a Partnership deed or Partnership agreement. Now, it is not mandatory to register a partnership arrangement among a few people into a partnership registration. There are many unregistered partnership firms in the country. But they are at all kinds of risks which makes them a risky pursuit for its member partner(s). Let us look at some of them in detail.
Since the partnership firm is not registered, it is not a legal entity in the eyes of law enforcement and so, the authorities cannot impose anything on such arrangements. A member-partner of an unregistered partnership firm cannot file a lawsuit against the firm or any of its partner(s) to enforce any of his/her rights arising from the partnership deed. For example, if your partners don’t allow you to withdraw your capital from the firm or respect the profit-sharing arrangement mentioned in the partnership deed, then you cannot take them to court, because your firm is not registered and an unregistered agreement is null in the eyes of law.
An unregistered firm cannot sue any third party in case of a violation of a contract because any lawsuit filed by an unregistered firm is not valid. The firm must register itself and the member-partner or any designated person suing on behalf of the firm must be shown in the Register of Firms.
Therefore, it is imperative that you register your partnership firm in the eyes of law so that you can save yourself from the losses you incur in case of violation of your partnership agreement.
Listed below are some of the benefits of registering a partnership firm.
Like I have said before, everything in this world is replaced by a better alternative, and so is the case with partnership firm registration as well. As the business progresses, issues are inevitable. A innovative approach at one time becomes an obsolete process with the time.
Partnership firm registration arrangements also have such issues. We have discussed some of them in the following points: