Partnership at Will, Particular Partnership and Registration of a Firm

4. Partnership at Will, Particular Partnership and Registration of a Firm

Two kinds of firm, based on duration and purpose:

1. Partnership at Will — Section 7. Where no fixed period has been agreed for the duration of the partnership, AND no provision has been made for how the partnership is to be determined (ended), the partnership is a "partnership at will". Its defining feature, covered further under Dissolution below, is that ANY partner can bring it to an end simply by giving notice in writing to all the other partners of their intention to dissolve the firm (Section 43).

2. Particular Partnership — Section 8. A person may become a partner with another person for a PARTICULAR undertaking or venture (for example, executing one specific construction contract), or for a FIXED period of time. Such a partnership, unless the partners agree otherwise, comes to an end automatically on the completion of that venture, or on the expiry of that fixed period (Section 42) — it does not need anyone to give notice. If the partners choose to continue the business beyond the completion of the venture or the expiry of the term, the firm is thereafter treated as a partnership at will.

Registration of a Firm — Sections 56 to 71.

Registration of a partnership firm under the Indian Partnership Act, 1932 is, notably, NOT compulsory — this is one of the sharpest contrasts with company formation, where registration is mandatory. A firm is free to start and carry on business without ever registering. In practice, however, the consequences of staying unregistered (below) are serious enough that most firms register anyway, and can do so at any time during their existence — there is no deadline and no penalty merely for registering late.

Procedure: an application (a Statement, in the prescribed form) is sent to the Registrar of Firms of the state in which the firm's place of business is situated (Andhra Pradesh maintains its own Registrar of Firms under the Act), signed by all the partners, along with the prescribed fee, stating:

• The name of the firm.
• The principal place of business, and the names of any other places where the firm carries on business.
• The date each partner joined the firm.
• The full names and permanent addresses of all the partners.
• The duration of the firm, if any.

Once satisfied that these requirements are met, the Registrar records the entry in the Register of Firms and issues a Certificate of Registration.

Effect of Non-Registration — Section 69. This is the single most heavily examined point in this section, because the consequences bite specifically at the moment a dispute reaches a court. An UNREGISTERED firm, or a partner of one:

1. Cannot sue a third party in any court to enforce a right arising from a contract (for example, cannot sue a customer for an unpaid bill), so long as the firm remains unregistered.
2. Cannot sue a co-partner, or the firm itself, to enforce any right arising from the partnership agreement (for example, a partner cannot sue the firm for their share of profits).
3. Cannot claim a set-off (an adjustment against a counter-claim) exceeding a prescribed value, in a suit brought against the firm by a third party. …