Registration of a partnership firm is not compulsory under law. It is left to the partners of the firm to register their firm or not. However,the advantages of registration of a partnership firm are that the registered firm offers an irrefutable legal proof of the existence partnership and the composition of partners, their address, and business activities, office of the firm etc. to the people who deal with it.
Advantages of registration of a partnership firm
Section 69 of Indian Partnership Act 1932 mentions benefits of registering a partnership firm.
- The major advantage of registration is that a partner of registered partnership can sue the co-partners and as well as the firm in case of dispute.
- The registered firm can also sue third parties as well as any of its partners in its own name to enforce its claim.
- The third parties who have dealings with the firm can sue the firm to enforce their claim against the firm.
- The incoming partner can enforce his right against the remaining partners rather than relying on the honesty of co-partners.
- The retired partner is liable to all the acts of the firm dealing with third parties before his retirement. The partner who is retired from the partnership will be discharged from the liabilities from the date of his retirement from partnership by giving a public notice and effecting the necessary changes in the register of firms. As per section 33 of partnership act, the expelled partner will be treated in the same way when a partner retires from the partnership.
- A partner is entitled to sue for the dissolution of the firm or for the accounts of a dissolved firm or to enforce any right or power to realize the property of a dissolved firm.
- The registered firm is entitled to claim tax benefits under the provisions of Income Tax Acts.
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