Partnership Firm Registration in Kerala: Deed, Procedure and Effect

A partnership firm is formed when two or more persons agree to carry on a business and share its profits. It is governed by the Indian Partnership Act, 1932. A firm can be started on the strength of a partnership deed alone, but registration with the Registrar of Firms gives it important legal rights, and in practice banks and many departments expect it.

This article explains how a partnership firm is formed and registered in Kerala, and the points to consider before choosing this structure.

Why register the firm

Registration is optional under the Act, but an unregistered firm suffers the disabilities in Section 69:

• The firm cannot file a suit against a third party to enforce a right arising from a contract
• A partner cannot sue the firm or the other partners to enforce rights under the deed
• The firm cannot claim a set-off above a small amount in a suit against it

Since these limits apply exactly when there is a dispute, registration is advisable from the start.

Steps to form and register a firm in Kerala

1. Draft the partnership deed, covering capital, profit sharing, duties, remuneration, admission and retirement of partners, and dissolution.
2. Stamp the deed as required under the Kerala Stamp Act, and have it signed by all partners.
3. Apply for PAN in the name of the firm.
4. Apply for registration with the Registrar of Firms in Kerala, which functions under the Registration Department, with the statement in the prescribed form, the deed and the fee.
5. Obtain other registrations as the business requires: GST, shop and establishment registration, local body licence and Udyam registration.

What the partnership deed should cover

• Name and place of business, and the nature of the business
• Capital contributed by each partner and interest on capital, if any
• Profit and loss sharing ratio
• Remuneration to working partners, within the limits allowed for tax purposes
• Powers of partners, banking authority and matters requiring consent of all
• Admission, retirement, death of a partner, and settlement of accounts
• Dissolution and dispute resolution

A detailed checklist is in key clauses every partnership deed should contain.

Changes after registration

Changes in the firm’s name, place of business, partners or the constitution of the firm must be notified to the Registrar of Firms under Sections 60 to 63 of the Act, so that the register reflects the current position. A retiring partner who does not give public notice of retirement can remain liable to third parties for the firm’s acts after leaving.

Points to consider before choosing a partnership

• Unlimited liability: each partner is jointly and severally liable for the firm’s debts, including those arising from the acts of other partners in the course of business.
• Number of partners: limited to 50.
• Taxation: the firm is taxed separately, and remuneration and interest to partners are deductible within limits.
• Conversion: a firm can later be converted into an LLP or a company. See converting a partnership into an LLP.

Frequently asked questions

Can a firm be registered after it has started business?

Yes. Registration can be applied for at any time, but the protection of registration applies only from the date of registration.

Is a partnership deed on plain paper valid?

The agreement may be valid between the partners, but a deed that is not properly stamped is not admissible in evidence until the duty and penalty are paid. It should be stamped at the outset.

Is a partnership better than an LLP?

A partnership is simpler and has less formal compliance, but partners have unlimited liability. Where the business carries significant risk or borrowing, an LLP is usually preferred. See LLP registration in Kerala.

ചുരുക്കം (Summary in Malayalam)

ഇന്ത്യൻ പാർട്ണർഷിപ്പ് ആക്ട്, 1932 പ്രകാരം രണ്ടോ അതിലധികമോ പേർ ചേർന്ന് ലാഭം പങ്കിട്ട് ബിസിനസ് ചെയ്യുന്നതാണ് പാർട്ണർഷിപ്പ് സ്ഥാപനം. രജിസ്ട്രേഷൻ നിർബന്ധമല്ലെങ്കിലും, രജിസ്റ്റർ ചെയ്യാത്ത സ്ഥാപനത്തിന് സെക്ഷൻ 69 പ്രകാരം കരാർ അവകാശങ്ങൾക്കായി കേസ് കൊടുക്കാൻ കഴിയില്ല. പാർട്ണർഷിപ്പ് ഡീഡ് തയ്യാറാക്കി സ്റ്റാമ്പ് ചെയ്ത്, PAN എടുത്ത്, കേരള രജിസ്ട്രേഷൻ വകുപ്പിന് കീഴിലുള്ള രജിസ്ട്രാർ ഓഫ് ഫേംസിൽ രജിസ്റ്റർ ചെയ്യണം. പാർട്ണർമാർക്ക് പരിധിയില്ലാത്ത ബാധ്യതയുണ്ട്; പിന്നീട് LLP-യോ കമ്പനിയോ ആക്കി മാറ്റാം.

This article gives a general overview of partnership firms under the Indian Partnership Act, 1932 as it applies in Kerala. Fees, forms and procedures are revised from time to time; for accurate and current requirements, check with the Registrar of Firms and the Registration Department, Kerala. The article is not advice on any particular case.