Two or more people can form a Partnership Firm subject to maximum of 20 individuals. A partnership deed is prepared that details the amount of capital of each partner, objects of the business, sharing of profit/loss, working partner(s)’ salary, etc. Partners of the firm have unlimited business liabilities which means their personal assets can be attached to meet business liability of the partnership firm. Also losses incurred due to act of one partner is liable for payment from every partner of the partnership firm. A partnership firm may or may not be registered with the concerned authority.
Benefits of Partnership
Registration is not compulsory in the case of Partnership firm. It can be formed without any much legal formality and expenses and a firm is legally identified by other registrations like VAT, Service Tax, etc. Thus they are simple and economical to form and operate.
They are less strictly regulated than companies and further because only the partners have the say in the way the business is run they are far more flexible in terms of management.
Partnership firms do not need to pay income tax; each partner files his/her own personal income tax return and thus the business does not get taxed separately.
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