A partnership is that two or more people jointly carry on a business and share its profit or loss. All the partners are jointly and severally liable for the debts of the business. The partnership can be made by partnership deed. Registration of partnership deed is optional. In case, partnership deed is not registered, the partners are to sue and to be sued in their individual capacity and not by firm’s name.
NOTE: The partner should be a natural person or legal person as in the case of companies registered under companies Act 1956. However, H.U.F is not a ‘person’ as it is a group of persons of the same family carrying on the family business. Hence an H.U.F cannot be a partner of a partnership firm.
Limited Liability Partnership (LLP):
The Limited Liability Partnership is an entity registered under Limited Liability Partnership Act, 2008. The liability of an LLP is restricted to its assets and partner’s liability is limited to their share contributed in the partnership. Thus partner’s liability in LLP is similar to that of the shareholders of a Limited company, although they are directly managing the business likes unlimited partnership firm. A partner of LLP, unlike the unlimited partnership, is not liable for wrongful business decisions or misconducts other partner/s.
The following documents are required for opening a partnership account in banks.
(a) A copy of Partnership deed shall be submitted along with the original deed. Original will be returned back to the depositor, after comparing the same with photocopy submitted to the Bank. A Registered partnership deed is desirable but not compulsory.
(b) If a formal partnership deed is not made, still it is possible to open the account, on the basis of a Partnership letter, signed by all the partners along with the Account Opening Form. This letter must be signed by all the partners in their individual capacity and not on behalf of the firm.
(c) Account should be opened in the name of the firm and not in the name of any partner.
(d) Account Opening form should be signed by all the partners. While operating the account the partners should sign for the firm and not as an individual Example as below. For ABC Enterprises Partner
(e) Certificate issued by Shops and establishment department of local municipality/ Sales tax/vat registration etc., can be called for if applicable for the business of the firm.
(f) Cheques payable to the firm should not be credited to the private account of any partners or any employee of the firm.
(g) In case any one of the partners in the firm writes to the bank, for stopping the operations by the other partner(s), all operations on the account must be stopped under intimation, in a joint letter addressed to all partners as well as the firm.
(h) When one of the partners of the firm dies, the operation in the account is to be stopped immediately and a fresh account is to be opened, provided the partnership deed permits the same.
(i) Branch should not open an account if already another account exists with them in the same name.