Common partnership firm mistakes include not registering the firm, drafting a vague deed without exit and dispute clauses, paying the wrong stamp duty, not authorising partner remuneration in the deed, and ignoring unlimited liability when taking on risky contracts. Each can cost money in disputes or tax.
Mistake: not registering
Section 69 bars unregistered firms from suing third parties on contracts. Registration is inexpensive protection.
Mistake: thin deed
Include profit ratios, capital, remuneration, retirement, death, valuation on exit and dispute resolution.
Mistake: tax-inefficient drafting
Partner remuneration and interest are deductible only if authorised by the deed and within Section 40(b) limits.
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Get expert help →Mistake: ignoring liability
Partners are personally liable for firm debts. Consider an LLP when risks grow.
Frequently asked questions
Can a partnership have only two partners?
Yes. The minimum is two partners, and the maximum is 50.
What happens when a partner dies?
The firm may dissolve unless the deed provides for continuation with remaining partners or legal heirs.
Can a partner be expelled?
Only if the deed permits expulsion and it is exercised in good faith by a majority of partners.
Can partners be employees of the firm?
Working partners receive remuneration as partners, not salary as employees, for tax purposes.
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