1. Joint Liability of Partners Partners in a firm are jointly responsible for the obligations of the business. All partners are equally liable for debts incurred by the firm. Creditors can sue any one or all partners for recovery. Each partner must ensure proper...

Growth of SMEs and Informal Sector India’s economic base includes a vast number of unorganized and small businesses, where partnership firms remain the preferred structure. Partnerships are easy to form and manage without heavy compliance Ideal for local businesses,...

Income Tax Dues Partnership firms are subject to income tax under the Income Tax Act, 1961. Flat income tax rate of 30% on net profit, plus cess and surcharge Must file ITR Form 5 annually, regardless of profit or loss Tax audit is mandatory if turnover exceeds ₹1...

 Accounting Treatment of Partner Loans Loans given by partners are recorded separately from their capital accounts in the firm’s books. Credited to a “Partner’s Loan Account”, not the capital account Reflected as a liability in the firm’s balance sheet Repaid...

 Definition of Fixed-Term Partnership A fixed-term partnership is created with a clear time frame agreed by the partners at the time of formation. Duration is mentioned explicitly in the partnership deed Can be for 1 year, 5 years, 20 years, or even 50 years—no...

 Legal Status of the Firm An inactive firm continues to exist in law until it is formally dissolved through mutual agreement or court order. The firm remains a legal entity, and partners are still bound by obligations The partnership deed remains in force unless...

 Threshold Limit for Goods (Intra-State Supply) For firms engaged in the supply of goods, GST registration becomes mandatory when their aggregate turnover exceeds ₹40 lakhs in most states. This limit applies to intra-state supply (within the same state) For...

Types of Permissible Foreign Remittances Partnership firms can accept foreign funds depending on the nature of the transaction and RBI guidelines. Export proceeds for goods or services rendered abroad Professional or consultancy fees from foreign clients Advance...

Breach of Fiduciary Duty Partners owe each other a duty of honesty, loyalty, and good faith. Any act that betrays this trust is considered misconduct. Withholding financial records or misrepresenting facts Diverting business opportunities for personal gain Failing to...

Legal Definition of a Partnership The fundamental legal requirement of a partnership is the presence of at least two competent partners. A partnership requires a minimum of two individuals If one partner exits, retires, or dies, the firm stands dissolved by law A...