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Agreement with Unregistered Partnership Firm

Agreement with Unregistered Partnership Firm: Understanding the Basics

Unregistered partnership firms are often a popular choice for businesses looking to pool resources and capital. They offer various benefits, including flexibility in operations and taxation, apart from being relatively easier to set up.

However, it`s essential to understand the legal implications of agreements made with an unregistered partnership firm. In this article, we`ll explore the basics of agreements with unregistered partnership firms and the considerations that businesses should keep in mind.

What is an Unregistered Partnership Firm?

An unregistered partnership firm is a partnership formed without registering it under the Partnership Act, 1932. It is a much simpler structure than a registered partnership firm, where partners have to register and comply with several legal formalities.

In an unregistered partnership firm, partners share profits and liabilities as per the partnership deed. However, since it is not registered, the partners may face certain legal issues in case of any disputes or conflicts.

Agreement with an Unregistered Partnership Firm

An agreement with an unregistered partnership firm involves two parties, the business, and the partnership firm. It is a legal contract that sets the terms and conditions of the partnership.

The agreement should explicitly state the mutual obligations of the parties involved, such as the roles and responsibilities of both parties, revenue sharing, and profit distribution. It should also mention the duration of the partnership and the termination clause.

Considerations for Businesses

While entering into an agreement with an unregistered partnership firm, businesses should keep the following considerations in mind:

1. Legal implications: Since an unregistered partnership firm is not a separate legal entity, the partners may face unlimited liability in case of any legal dispute or financial obligation. Hence, businesses should include a clause in the agreement clarifying the extent of liability for each party.

2. Partnership deed: The agreement should incorporate the partnership deed, which outlines the terms of the partnership, including the revenue sharing ratio, capital contribution, profit sharing, and liability.

3. Termination clause: Businesses should include a termination clause in the agreement, specifying the conditions under which the partnership may end.

4. Governing law and jurisdiction: The agreement should clearly state the governing law and jurisdiction in case of any legal dispute.


In conclusion, an agreement with an unregistered partnership firm can be a viable option for businesses looking to partner with an entity that offers flexibility and simplicity in operations. However, businesses should ensure that the agreements are legally compliant and incorporate all the essential terms and conditions regarding the partnership. It`s advisable to consult a legal expert while drafting such agreements to avoid any legal disputes or implications.

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