Set Up Your Partnership or Proprietorship
Partnership deed drafting and firm registration, or the registrations a proprietorship needs to open a current account and start billing. We tell you which registrations apply before anything is filed.
From deed to current account
- Partnership deedStamp paper
- Firm registrationRegistrar of Firms
- Udyam, GST, Shops & Est.As applicable
- Current account documentsRBI KYC
- Every filing reviewed by a CA
- One named CA, year after year
- Confidential under the CA Act, 1949
- Replies within 2 hours on working days
Two Simple Ways to Start
Neither needs incorporation with the MCA. Both carry unlimited liability, so they suit businesses where that risk is manageable.
- Partners
- Minimum 2, maximum 50
- Liability
- Unlimited, joint and several
- Registration
- Optional, and can be done at any time
- Governing document
- Partnership deed on stamp paper
- Registered with
- Registrar of Firms of the state
- PAN
- Separate PAN in the firm’s name
Partnership Firm
Two or more persons who agree to share the profits of a business carried on by all or any of them acting for all. The terms are set out in a partnership deed, and the firm can be registered with the Registrar of Firms of your state.
Simple to form
A firm comes into existence through a partnership deed between the partners; no incorporation filing with the MCA is needed.
Shared capital and skills
Partners pool money, experience and workload, and share the profits in the agreed ratio.
Flexible terms
The deed sets capital contributions, profit-sharing, roles, and the terms for partners joining or leaving.
Fewer statutory filings
No annual filings with the Registrar of Companies. The firm files its own income-tax return, and GST returns if registered.
Right to enforce contracts
A registered firm can sue third parties to enforce its contracts, which an unregistered firm cannot do.
Path to an LLP
A partnership firm can later be converted into a Limited Liability Partnership under the LLP Act, 2008.
Keep in mind
- Every partner is personally liable, jointly with the others and individually, for all acts of the firm done while they are a partner.
- If the firm is not registered, it cannot sue third parties to enforce a contract, and partners cannot sue the firm or each other to enforce such rights.
- A firm cannot have more than 50 partners.
Documents required
Self-attested copies, scanned clearly. We confirm the final checklist for your case.
Each partner
- PAN card
- Identity proof: Aadhaar, voter ID, passport or driving licence
- Address proof: bank statement or a recent utility bill
- Passport-size photograph
Firm & place of business
- Partnership deed on non-judicial stamp paper (value as per state), signed by all partners
- Proof of the principal place of business: ownership document, or rent agreement if rented
- No-objection letter from the owner, if the premises are not owned by a partner
For firm registration
- Application in the state’s prescribed form (Form 1 in many states), signed by all partners
- Registration fee as prescribed by the state
For the firm’s current account
- Registration certificate, partnership deed and the firm’s PAN
- Names of all partners and the firm’s address
- KYC documents of the partners who will operate the account
Registration process
Registration is with the Registrar of Firms of your state; the form, fee and stamp duty vary by state.
- 1
Agree the terms
The partners agree the firm name, nature of business, capital contributions, profit-sharing ratio and each partner’s role.
- 2
Draft and execute the deed
The partnership deed is drafted, printed on non-judicial stamp paper of the value your state requires, and signed by all partners.
- 3
Firm PAN
A PAN is applied for in the firm’s name on the basis of the deed, along with a TAN if the firm will deduct tax at source.
- 4
Register with the Registrar of Firms
The application, deed and proofs are filed with the Registrar of the area where the firm’s place of business is situated. The firm is then entered in the Register of Firms.
- 5
Bank account and business registrations
Open the firm’s current account, then register for GST where required, Udyam, and the Shops & Establishment licence as your state requires.
- Owner
- 1 individual
- Legal status
- Not separate from the owner
- Liability
- Unlimited; personal assets are at risk
- PAN
- The owner’s own PAN
- Registration
- No single law; through Udyam, GST, Shops & Establishment
- Income tax
- Business income is part of the owner’s own return
Sole Proprietorship
A business owned and run by one individual. It is the simplest structure: there is no incorporation, and in law the business and its owner are the same person. The business gets its identity through registrations such as Udyam, GST and the Shops & Establishment licence.
Quickest to start
No incorporation, deed or partner agreement is needed; you can begin once the registrations your business needs are in place.
Full control
One person takes every decision and keeps all the profits.
Free Udyam registration
Udyam registration on the government portal has no fee and is based on your Aadhaar and PAN; it is accepted by banks as proof of the business.
Minimal compliance
No annual filings with the Registrar of Companies; business income is reported in the owner’s own income-tax return.
Low running cost
No board meetings, partner agreements or statutory registers to maintain.
Easy to close
There is no winding-up procedure; closing involves cancelling the registrations taken for the business.
Keep in mind
- The owner is personally liable for all the debts of the business.
- The business is not a separate legal entity, so it cannot issue shares or bring in partners without changing structure.
- Moving to a partnership, LLP or company later means setting up the new entity and transferring the business to it.
Partnership vs Proprietorship
The differences that usually decide the choice.
| Feature | Partnership | Proprietorship |
|---|---|---|
| Owners | 2 to 50 partners | 1 individual |
| Separate legal entity | No | No |
| Liability | Unlimited, joint and several | Unlimited |
| Governing document | Partnership deed | None |
| Registration | Registrar of Firms (optional, advisable) | Through Udyam, GST, Shops & Establishment |
| PAN | Firm’s own PAN | Proprietor’s PAN |
| Income tax | Firm files its own return | Included in owner’s return |
| Bank account documents | Registration certificate, deed, firm PAN | Any two proofs in the business name |
| Next structure | Convert to an LLP | Move to partnership, LLP or company |
Partnership & Proprietorship, Answered
Straight answers to what owners ask before they start.
No. Under the Indian Partnership Act, 1932, registration is optional and can be done at any time. But an unregistered firm cannot file a suit against a third party to enforce a right arising from a contract, and a partner cannot sue the firm or the other partners to enforce such a right. Because of this, registering the firm is usually advisable.
There is no single law under which a proprietorship is registered. The business gets its identity through registrations such as Udyam (MSME) registration, GST registration where required, and the Shops & Establishment licence under your state’s law. To open a current account in the business name, banks ask for any two documents from the list in the RBI KYC directions, such as the Udyam certificate, GST certificate, Shops & Establishment certificate or a utility bill in the business name.
In most states, registration is required once aggregate turnover crosses ₹40 lakh for businesses supplying only goods within the state, or ₹20 lakh for services. Lower limits apply in Manipur, Mizoram, Nagaland and Tripura. Some businesses must register regardless of turnover, such as those making inter-state supplies of goods or selling through e-commerce platforms. We check which applies to you before registering.
Yes. A partnership firm can be converted into a Limited Liability Partnership under the LLP Act, 2008. A proprietor who wants limited liability or outside investment can move the business into a new private limited company, OPC or LLP. We can set out what the move involves when you are ready.
This information is general in nature and is not a substitute for advice on your specific case.
Book Free Consultation
Tell us about your business and who is involved, and a Chartered Accountant will reach out to explain which registrations apply and share the document checklist. Your information is kept confidential and used only to respond to your enquiry.
- Every filing reviewed by a Chartered Accountant
- No obligation, an initial conversation about your needs
- Handled securely and confidentially
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