Overview
An unregistered partnership firm is a business structure where two or more individuals come together to carry on a business and share its profits, without registering the partnership under the Indian Partnership Act, 1932. Although registration is not mandatory, the partnership deed must still exist as a written agreement between the partners outlining their rights and duties. Unregistered firms are legal, but they face certain limitations when it comes to enforcing rights through the legal system as outlined in Section 69 of the Indian Partnership Act, 1932.
Why
Unregistered partnership firm offers various advantages as follow: -
- Quick and Easy Setup: No need for registration with the Registrar of Firms, you just need to execute a partnership deed and start operations.
- Low Cost of Formation: Avoids government registration fees and reduces legal expenses.
- Privacy: Details of the firm and partners are not made public, unlike registered entities.
- Operational Flexibility: Partners can mutually decide and modify business terms without formal procedures.
- Simple Documentation: Only a partnership deed is required; no filings or approvals from government authorities.
- Ideal for Small Ventures: Suitable for closely held businesses that do not require external funding or government contracts.
- Minimal Compliance: No mandatory annual filings or ROC compliance like other registered business structures.
- Legal Existence: Despite being unregistered, the firm can operate, earn profits, file taxes, and open bank accounts.
Process
To Start an Unregistered Partnership Firm involves: -
- Mutual Agreement: Partners must agree to form a partnership.
- Drafting Partnership Deed: A legal document containing the terms and conditions of the partnership.
- Execution of Deed: Signed by all partners on a non-judicial stamp paper.
- PAN Application (if required): Apply for PAN in the firm’s name.
- Opening a Bank Account: Use the deed and PAN to open a business bank account.
- Commence Business Operations: Start operations without registration under the Registrar of Firms.
Documents
- Partnership Deed
- PAN Card of Partners
- Aadhaar Card/Voter ID/Passport of Partners
- Address Proof of Business Place (Electricity Bill/ Rent Agreement)
- Passport Size Photographs of Partners
- Affidavit (if required for certain bank or tax-related processes)
Fees
For an unregistered partnership firm, there is no government registration fee since the firm is not registered with the Registrar of Firms. However, stamp duty on the partnership deed is mandatory and varies from state to state based on the capital contribution and state-specific stamp laws.
Note: Since the firm is not registered with the Registrar of Firms, no registration fee is applicable.
Timeline
The timeline to start an unregistered partnership firm is quick, easy and simple. Drafting the partnership deed takes 1–2 days, PAN application takes around 5–7 working days, and opening a bank account takes 2–5 days. Overall, the business can typically start within 5–7 working days, depending on PAN processing and bank account activation.
FAQs
Yes, an unregistered partnership firm is legally valid under the Indian Partnership Act, 1932. However, it cannot enforce certain rights in a court of law unless it gets registered.
The biggest limitation is that the firm or its partners cannot file a lawsuit against third parties for breach of contract. However, third parties can still sue the firm.
Yes, it can. A duly executed partnership deed, PAN of the firm, and KYC documents of the partners are typically sufficient to open a current account.
No, it's not legally mandatory, but a written and notarized partnership deed is highly recommended for the purpose of legal clarity and dispute resolution.
Yes. An unregistered firm can apply for a PAN card in the firm’s name and also register under GST if required, especially if its annual turnover exceeds ₹20 lakhs (₹10 lakhs in special category states), as per GST Act.
There is no registration fee since the firm is not registered. However, stamp duty on the partnership deed must be paid, which varies by state and capital contribution.
Yes. The firm can own movable and immovable assets in its name, subject to terms agreed in the partnership deed and as per applicable laws.
Yes. As per the Companies Act, 2013, a partnership firm (registered or not) cannot have more than 50 partners.
Yes. A firm can be registered any time after its formation by submitting the required documents and fees to the Registrar of Firms.
Yes. Like any other business, an unregistered partnership firm is required to file income tax returns if its income exceeds the basic exemption limit.
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