Understanding the Maximum No. of Partners in Partnership Firm

Introduction

A partnership firm is an agreement between two or more individuals who agree to share the profits and losses, respectively. The individuals who join the agreement are known as “partners,” and the company they form collectively in partnership is known as a “partnership firm.”

• It has no separate legal identity distinct from the partners, and each partner is personally liable for the debts of the partnership firm. The maximum no of partners in a partnership firm can be 50-100.
• Every partner has separate roles and duties assigned to them and is entitled to take part in the decision-making and management of the firm.
• The interest of any partner cannot be transferred in the firm without the mutual accord of all the other partners.
• If the partner contributes shares in the firm, then the individual only receives financial profit and does not become a partner unless the other partners have agreed upon it.
• The partnership firm can be registered or not; registration of the partnership firm is not mandatory, even with a maximum no of partners in the partnership firm.
• The minimum capital is not a specific amount in the case of a partnership firm as the maximum no of partners in a partnership firm helps in a maximum contribution if possible.
• The profit is distributed among all the partners as settled upon in the partnership deed, which can be a little complicated if there are a maximum no of partners in a partnership firm.
• A partnership firm has no legal bounds in case of voluntary dissolution.
• The business can be carried on by any partner on behalf of another partner. The members can be active or inactive and can reach the maximum no of partners in partnership firms.
• The maximum no of partners in partnership firms as approved by the “Companies Act 2013” is 100. The previous no was 10 to 20 for banking business and other types of businesses as decided by the “Companies Act 1956”.

The Act Regulates the Maximum Number of Partners in a Partnership Firm

The Indian Partnership Act 1932 governs partnership but does not regulate the maximum no of partners in a partnership firm. 

• It is determined by the Companies Act 2013 (section 464), which allows up to 100 as the maximum no of partners in partnership firms.
• According to Rule 10 of Companies (Miscellaneous) Rules, 2014 states, the maximum no of partners in partnership firms should not exceed 50.
• A partnership firm is formed by a minimum of two people.
• The central government stated that the maximum no of partners in partnership firms could not exceed 50 as per Rule 10(2014).

How to Start a Partnership Firm?

The partnership firm can be started by making sure of some important points, which are mentioned below:

• Choose a relevant name for the partnership firm.
• Draft a deed of partnership which must be attested by each partner and approved by the sub-registrar.
• The registration of the partnership firm is completed after the submission of the authorized documents to the registrar.
• The registrar will then finally issue a certificate, and the company name will be added to the government database.
• Before starting the registration process, an individual can have their queries resolved and can receive legal advice about the procedure by consulting a lawyer online, as it will be convenient and hassle-free.
• The maximum no of partners in a partnership firm should be considered while doing the partnership deed, as many individuals have a preference for a public company because of unlimited partner joining capability.

Differences in the Maximum Number of Partners in Partnership Firm and Company

• The maximum no of partners in partnership firms as approved by the “Companies Act 2013” is 100. The previous no was 10 to 20 for banking business and other types of businesses as decided by the “Companies Act 1956”.
• In the case of a private company/firm, the maximum no of partners was enlarged from 50 to 200 under the “Companies Act 2013”. 
• In the case of a public company, the no of members has no limit or bounds by the law.

Differences in the Minimum Number of Partners in a Partnership Firm and a Company

• The minimum number of members in a partnership firm is 2.
• The minimum number of members in a private company is 2.
• The minimum number of members in a public company is 7.

Beneficial Attributes of a Partnership Firm

There are many advantages of a partnership firm, as there are in any company; some of these are:

• It is a relatively simple procedure to form a partnership. A simple agreement is required, which can be either verbal or written.
• The requirements are not complicated and can be met with proper management among the partners.
• The maximum no of partners in a partnership firm is 50-100, so it means more capital contributions and better idea formation.
• It is recommended for small businesses because the cost of setting up such a firm is not much as each partner contributes and shares the capital invested, and hence, the borrowing capacity is increased.
• There are statutory regulations that need to be complied with even where there is a maximum no of partners in partnership firms.
• The profit/loss are equally shared and divided, which reduces the risk and liability for individual partners.

 Everything related to a maximum no of partners in partnership firms and its issues and regulations can be easily solved by consulting a lawyer online as they will help by explaining thorough details of the clauses mentioned in any agreement.

Conclusion

The maximum no of partners in a partnership firm is not regulated by the Partnership Act 1932. It was first decided in the Companies Act 2013 that the maximum no of partners in a partnership firm cannot exceed 100

After this was in order, the new Rule 10 of Companies (Miscellaneous) Rules 2014 prescribed that the company management is not allowed by more than 50 partners, so the maximum number of partners in partnership firm cannot go above 50.

The prior Companies Act 1956 stated that the maximum no of partners in a partnership firm was 10-20 in banking and other businesses.