Two sentences in two statutes decide more about your partnership than the whole of the deed you are about to sign. One says you are personally liable for everything your partners do. The other says that if the firm is not registered, it cannot sue anybody. Read those two before you read a format.
This surprises people, so it is worth starting here. A partnership is a relation, not a document. Where people have agreed to share the profits of a business carried on by all or any of them acting for all, that relation exists — whether or not anybody wrote anything down.
Which means two things at once. First, if you and a friend have been running something together and splitting what it makes, you may already be partners, with everything on this page applying to you. Second, the deed is not what creates the partnership. It is what proves the terms of it.
And the terms are the whole fight. Nobody ever disputes that there was a partnership. They dispute who put in what, who takes what out, who was allowed to sign what, what a leaving partner is owed, and who owns the customers. A deed that answers those is worth a great deal. A deed downloaded from the internet that answers none of them is worth the stamp paper.
Section 25, The Indian Partnership Act, 1932
"Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner."
Source linked at the foot of this page.
Twenty-two words. Read the one that does the damage: severally.
Jointly liable would mean a creditor sues all of you together. Severally liable means the creditor may choose to sue you alone, for the whole amount — and collect the whole amount from you. Your right to recover the others' shares from them is a separate fight, which you conduct afterwards, at your own cost, against people who may by then have nothing.
So the most common belief about partnership is simply wrong. A partner with a thirty per cent share does not have thirty per cent of the liability. They have one hundred per cent of the liability and thirty per cent of the profit.
And "all acts of the firm" is not limited to things you knew about. A partner who signs a supply contract you never saw, takes a loan you never agreed to, or makes a promise to a customer you never met has bound you, because within the ordinary business of the firm a partner acts as the agent of the firm and of every other partner.
Two practical consequences that follow directly, and which most deeds are silent about:
Tell us what the business will actually do — who it sells to, whether it takes credit, whether it employs people. That decides whether a partnership firm is the right vehicle at all, and it is a conversation we would rather have first. It costs nothing.
You will read everywhere that registration of a partnership firm is optional. That is technically true and practically misleading, because of what the Act does instead of imposing a penalty.
Section 69, The Indian Partnership Act, 1932
69(1) — "No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the register of firms as a partner in the firm."
69(2) — "No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the register of firms as partners in the firm."
Sub-section (3) extends the bar to claims of set-off and other proceedings to enforce a contractual right.
Source linked at the foot of this page.
Now see the shape of it. Nothing in Section 69 stops anybody from suing you. It stops you from suing. An unregistered firm can be sued by its customers, its suppliers, its landlord and its employees — and cannot sue any of them.
Worse, sub-section (3) takes away the set-off as well. So when the supplier sues you for ₹5 lakh and you say "but they owe us ₹3 lakh on the previous order", that defence is caught too.
For any business that gives a day's credit, that asymmetry is not a technicality. It is the difference between having a business and having a hope.
So our standing advice is simple: register the firm. It is not expensive, it is not slow, and the alternative is a firm that cannot enforce a single contract it makes. We include the registration in what we quote rather than treating it as an upsell, because a deed without it is half a job.
If you are already in an unregistered firm and it has gone wrong, do not conclude from the section above that you have no remedy. Section 69(3) carves out exactly the remedies you are most likely to need in that situation.
The bar in sub-sections (1) and (2) does not affect:
A suit for dissolution of the firm. You can ask the court to end it.
A suit for accounts of a dissolved firm. You can make the others account for what came in and what went out.
A suit to realise the property of a dissolved firm. You can get the assets gathered in and divided.
It also does not affect the powers of an official assignee or receiver under the insolvency law to realise the property of an insolvent partner.
Read that against sub-sections (1) and (2) and the design becomes visible. The law will not let an unregistered firm enforce its bargains. It will let a partner get out and take accounts. So the route for someone stuck in an unregistered firm is usually not to sue on the contract — it is to dissolve, account, and divide.
There is also a small-claims exception in sub-section (4) for suits not exceeding one hundred rupees in value, and the section does not apply to firms with no place of business in the territories concerned. Neither is likely to be your escape route in 2026.
This section costs us money and belongs on the page anyway, because for a large share of the people who come asking for a partnership deed, the honest answer is that they want something else.
Sections 3, 27 and 28, The Limited Liability Partnership Act, 2008
3(1) — "A limited liability partnership is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners."
3(2) — "A limited liability partnership shall have perpetual succession."
3(3) — "Any change in the partners of a limited liability partnership shall not affect the existence, rights or liabilities of the limited liability partnership."
27(3) — "An obligation of the limited liability partnership whether arising in contract or otherwise, shall be solely the obligation of the limited liability partnership."
27(4) — "The liabilities of the limited liability partnership shall be met out of the property of the limited liability partnership."
28(1) — "A partner is not personally liable, directly or indirectly for an obligation referred to in sub-section (3) of section 27 solely by reason of being a partner of the limited liability partnership."
Section 28 also provides that a partner is not personally liable "for the wrongful act or omission of any other partner" — while remaining answerable for their own.
Source linked at the foot of this page.
Put that beside Section 25 of the 1932 Act and the difference is not a matter of degree.
| Partnership firm | LLP | |
|---|---|---|
| Your personal liability | Joint and several, for all acts of the firm. Unlimited. | Not personally liable for the LLP's obligations merely by being a partner, nor for another partner's wrongful act. Liable for your own acts. |
| Legal identity | The firm is not separate from the partners. | A body corporate, a legal entity separate from its partners. |
| Continuity | Death or retirement of a partner affects the firm unless the deed says otherwise. | Perpetual succession. A change of partners does not affect its existence, rights or liabilities. |
| Ability to sue | Barred by Section 69 unless registered. | Sues and is sued in its own name. |
| Setting up | A deed, stamp duty, and registration with the Registrar of Firms. | Incorporation with the Registrar of Companies, designated partners, DIN/DPIN. |
| Ongoing compliance | Light. | Annual statement of account and solvency, annual return, and the filings that go with a body corporate. |
| Sensible for | A small family business, no outside credit, no employees to speak of, low third-party risk. | Anything that signs contracts, takes credit, holds stock, employs people, or has partners who do not watch each other daily. |
A partnership deed is not a formality to be filled in. Every clause below exists because a real firm once broke up over its absence.
The firm name, the principal place of business, every partner with full name and address, and the business the firm will carry on — stated with enough precision that it is clear when somebody has stepped outside it, and enough width that ordinary growth does not require a new deed.
Whether the firm is for a fixed term, for a particular venture, or at will. A partnership at will may be dissolved by any partner by notice in writing to all the others — so if you do not want one partner able to end the firm at any moment, the deed has to provide otherwise.
Cash, machinery, premises, stock, goodwill, a licence, a client list. Non-cash contributions must be valued in the deed, because their value will be disputed at exactly the moment nobody can agree on anything. State whether interest is payable on capital, and at what rate.
The ratio in which profits are shared, and the ratio in which losses are borne. They need not be the same and often should not be. A deed that says only "profits shall be shared equally" leaves losses to follow the same ratio by default, which may be the opposite of what the partner who put in all the money intended.
Who works in the business full time, what they are paid for it, and what each partner may draw against profits before accounts are settled. This is the single most common cause of partnership bitterness — one partner works and one partner does not, and the deed treats them identically.
What any partner may do alone, and what requires the written consent of all — borrowing, giving guarantees, pledging assets, hiring above a level, signing contracts above a value, opening or operating bank accounts, engaging a relative, taking on a new line of business.
Which bank, who operates the account, whether jointly, and what limits apply. Where the books are kept, who keeps them, that every partner may inspect them at any time, and when accounts are drawn up and agreed. A right of inspection that is not written down is a right you will be asked to prove.
Whether a partner may carry on a competing business, and what happens to the firm's information, customers and suppliers if someone leaves. Our NDA covers the same ground for people who are not partners.
Whether one may be admitted at all, by whose consent, on what terms, and how the existing shares are adjusted. Without this, a new partner requires unanimity, which is sometimes exactly what you want and sometimes a deadlock.
Notice required to retire, whether expulsion is possible and on what grounds, how a departing partner's share is valued, over what period it is paid, whether the firm continues, and what happens to a deceased partner's share and their heirs. This is dealt with in its own section below because it is where deeds most often fail.
How the firm may be dissolved, how assets are realised, the order in which liabilities and capital are paid, and who keeps the name, the premises and the goodwill.
Arbitration or the courts, the seat, and who bears the cost. Partners who agree this while they are friends save themselves an argument about the forum on top of the argument about the money.
Who brings what, who works, who signs, and what happens when one of you wants out. Those four answers make the deed. We will ask the questions if you would rather talk it through. Nothing payable in advance.
From the disputes we see, the pattern is remarkably consistent. None of these is exotic, and every one of them is a clause somebody left out.
Notice what these have in common. They are all about money over time, not about the day the firm starts. A deed written for the first day and not for the fifth year is a deed that will be useless exactly when it is needed.
A minor cannot be a partner — a partnership is a contract and a minor cannot contract. But a minor may be admitted to the benefits of a partnership with the consent of all the partners.
Where this goes wrong in family firms. A child is given a share for tax or succession reasons and nobody tracks the date they turn eighteen. The election period passes unnoticed, and the position that results is not the one the family assumed. If your deed admits a minor to the benefits, put the majority date in the deed itself and diarise it.
A partner may retire with the consent of all the other partners, or in accordance with an express agreement between them, or — where the partnership is at will — by giving notice in writing to all the other partners. A retiring partner remains liable for acts done before retirement, and can remain liable to people who dealt with the firm afterwards unless public notice of the retirement is given. That last point catches people: leaving quietly is not leaving.
A partner may not be expelled by a majority of partners unless that power is conferred by contract between them — and even then it must be exercised in good faith. So: no clause, no power. And a power exercised to take a partner's share cheaply, or for a reason outside the grounds stated, is one a court will examine closely.
A firm is dissolved by the death of a partner unless there is a contract to the contrary. In a two-partner firm with a silent deed, the death of one ends the firm — which is rarely what anybody intended, and always discovered at the worst moment.
What a properly drafted death clause does. It says the firm continues with the surviving partners. It states how the deceased partner's share is valued and as at what date. It states over what period the value is paid to the legal heirs, and with what interest. It says whether the heirs may join as partners, and if so on what terms. And it says who is entitled to the firm name and goodwill.
Four sentences. They are the difference between a business that survives a death and a family that spends three years in court. Our will drafting guide deals with the other half of this problem.
| Item | Who charges it | What to expect |
|---|---|---|
| Our drafting charge | Us | From ₹2,500, 1 – 3 days, payable after the work. |
| Stamp duty | State government | Set by the state where the firm is based; several states use a slab based on the capital contributed. Quoted before drafting, paid at actuals. |
| Registration with the Registrar of Firms | State | The prescribed fee. We treat this as part of the job, not an upsell. |
| Notary | Notary | At the notary's rate, where required. |
| Firm PAN and bank account | Government / bank | At actuals. The bank will want the deed and the registration certificate. |
| GST registration, if applicable | Government | No government fee for registration itself; depends on turnover and the nature of supply. |
| Later amendments | Us, plus stamp | A supplementary deed on a change of partners, shares or capital — and the change must also reach the Registrar's record. |
Two standing promises. You pay nothing in advance — placing the order is free and payment comes after the work. And we do not draft a document we know to be wrong for you, which on this page means we will not sell you a partnership deed when your facts call for an LLP.
What it sells, who it sells to, and whether it takes credit. Those three answers decide whether you want a partnership firm at all — and if you do, they decide half the clauses in the deed.
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