Frequently asked questions
Answers to common questions about forming and structuring a business partnership in India.
What is the difference between a partnership firm and an LLP in India?
A partnership firm is governed by the Indian Partnership Act of 1932, is simple to set up, but leaves partners with unlimited personal liability for the firm's debts. A Limited Liability Partnership is governed by the LLP Act of 2008, is a separate legal entity and limits each partner's liability, though it requires annual filings with the Registrar. The trade-off is roughly simplicity against protection and compliance.
What should a partnership deed include?
A sound partnership deed sets out each partner's capital contribution, how profits and losses are shared, the duties and powers of each partner, and how partners are admitted or exit. It should also state how decisions are made and how disputes will be resolved. Writing these terms down early prevents most of the disagreements that break partnerships apart.
How do I choose the right business partner?
Look for shared values and complementary skills rather than relying on friendship alone, since a partner you work well with matters more than one you simply get along with. Agree upfront on roles, money and decision-making authority. Crucially, discuss what happens if one of you wants to leave, before any money is on the line.
Do co-founders need a written agreement from the start?
Yes, a written agreement from the outset is one of the best protections a founding team can give itself. It records who owns what, how decisions are made, how equity vests over time and what happens if a founder departs. Settling these points while everyone is optimistic is far easier than negotiating them during a conflict.
What are the common causes of partnership disputes?
Most disputes trace back to vague expectations: unclear roles, undocumented money arrangements, unequal effort and no agreed exit process. They tend to surface later, when the business grows or one partner wants out. A clear written agreement covering money, duties, decision-making and exit addresses the root causes before they become fights.