What are the consequences of non-registration of partnership firm?

Registration of a partnership firm is not compulsory under law. The Partnership Act, 1932 provides that if the partners so desire they may register the firm with the Registrar of Firms of the State in which the main office of the firm is situated.

Procedure for Registration: In order to get a partnership firm registered an application in the prescribed form must be filed with the Registrar of Firms. The application should contain the following information:

(i) The name of the firm

(ii) The principal place of business of the firm.

(iii) Names of other places where the firm’s business is carried on.

(iv) Names in full and permanent addresses of the partners.

(v) The date on which each partner joined the firm,

(vi) Duration of partnership, if any.

The application should be signed and verified by each partner. A small amount of registra­tion fee is also deposited along with the application. The application submitted to the Registrar is examined.

If everything is in order and all legal formalities have been ob­served, the Registrar shall make an entry in the register of firms. He will also issue a certificate of registration.

Any change in the information submitted at the time of registra­tion should be communicated to the Registrar. Registration does not provide a legal entity to the partnership firm.

Consequences of Non-Registration: An unregistered partnership firm suffers from the fol­lowing limitations:

1. It cannot enforce its claims against a third party in a court of law.

2. It cannot claim adjustment for any sum exceeding Rs. 100. Suppose an unregistered firm owes Rs. 1200 to A and A owes Rs. 1000 to the firm the firm cannot enforce adjustment of Rs. 1000 in a court of law.

3. It cannot file a legal suit against any of its partners.

4. Partners of an unregistered firm cannot file any suit to enforce a right against the firm.

5. A partner of an unregistered firm cannot file a suit against other partners. Non-registration of a firm, however, does not affect the following rights:

(i) The right of a partner to sue for the dissolution of the firm or for the accounts of a dissolved firm or to enforce any right or power to realise the property of a dissolved firm.

(ii) The power of an Official Assignee or Receiver to realise the property of an insolvent partner.

(iii) The rights of the firm, or its partners, having no place of business.

(iv) Any suit or set off in which the claim does not exceed rupees one hundred.

(v) The right of a third party to sue the unregistered firm or its partners.