A Partnership Firm is a business structure where two or more people come together to run a business and share its profits and losses. It is governed by the Indian Partnership Act, 1932. The partners contribute money, skills, or other resources to the business and manage it jointly according to the terms mentioned in a Partnership Deed.
The Partnership Deed is a written agreement that defines the roles, responsibilities, profit-sharing ratio, and other important terms between the partners. A partnership firm can be either registered or unregistered, though registering it with the Registrar of Firms is beneficial in case of legal disputes.
In a partnership, the liability of the partners is unlimited, which means they are personally responsible for the debts and obligations of the firm. This structure is suitable for small to medium-sized businesses where mutual trust and cooperation among partners are important.
It is easy to form and operate a partnership firm, and it requires fewer compliance formalities compared to a company.