Different Types of Partnerships in India

1. Different Types of Partnerships in India At some point in life, everyone dreams of starting a business with their best friends. The dream of becoming a business partner with their best friends becoming true for some of us. There are multiple types of partnerships that you can choose for your business. Before selecting the type of partnership it is essential to understand the pros and cons of each. What is Partnership Partnership is a type of business structure in which two or more partners manage and operate a business. All the terms and conditions of the partnership firm are written in a legal document which is signed by all the partners and known as partnership deed. Features of Partnership ● Mutual Agreement: A partnership is formed through a mutually binding agreement between partners. ● Profit Sharing: Partners share the business profit or loss based on the partnership deed. ● Joint Ownership: All the partners jointly own and manage the business. ● Unlimited Liability: Partners are personally liable for all the debts and obligations. ● No Separate Legal Entity: Unlike some other types of business entities partnership is not a separate legal entity. Advantages of Partnership ● Easy to Incorporate: Partnership firms are relatively easy to form and require minimum formalities. ● Flexibility: Partnership firms offer flexibility in decision-making and operations. ● Shared Responsibility: The responsibility of the business management and operation is shared among all the partners. ● Tax Benefits: Profits are taxed as the personal income of the partners avoiding corporation taxation. Types of Partnership Firms In India, all partnership firms are governed by the Indian Partnership Act, of 1932. A partnership firm can be formed based on a deed or contract, which needs to categorically mention the terms and conditions that provide details regarding the sharing of the profit and risk among all the partners. General Partnership: In this type of partnership, two or more individuals decide to run their business as co-owners.The profit-sharing ratio is may or may not equal. The ownership and profit-sharing ratio will be based on a partnership agreement signed before commencing the agreement. Limited Partnership: It is a more formal and organised form of a partnership firm. In a limited partnership, there should be at least one general partner who is responsible for overall

2. businesses. They also bear the business liabilities. These general partners are supported by the other partners who provide finances to run a business but are not involved in day-to-day activities. Limited Liability Partnership(LLP): A combination of a general partnership and a limited partnership is known as a limited liability partnership or LLP. In this model of partnership, all the members of the company are actively engaged in the day-to-day operations. Still, they can save themselves from liability and are only liable for their actions. Limited Liability Company Partnership: It is a hybrid model of business entity that combines the benefits of both corporation and partnership. In this partnership, owners have protected themselves from taking responsibility for other debts or liabilities. LLC partnerships can be formed between two or more members known as owners. Joint Venture: A joint venture is a type of partnership between two companies where each company agree to share the risks and rewards of the venture. The major motive for establishing a joint venture is often formed to undertake specific projects or to enter into new markets. Conclusion Understanding the different types of partnerships can help you find the best one. Selecting the most suitable type of partnership can help in business growth and safeguard you from debts.