A partnership is a type of business structure where two or more partners start an entity to do business. For a partnership to exist, there must always be two or more partners.
A Partnership is defined by the Partnership Act, 1932, (the “Partnership Act”) as ‘the relation between persons who have agreed to share profits of the business carried on by all or any of them acting for all’. This definition gives three minimum requirements to constitute a partnership:
There must be an agreement entered into orally or in writing by the persons who desire to form a partnership,
the object of the agreement must be to share the profits of business intended to be carried on by the partnership, and
The business must be carried on by all the partners or by any of them acting for all of them. The term ‘person’ is not defined by the Partnership Act.
It is not compulsory to register your partnership firm as there are no penalties for non-registration. However, it is advisable since the following rights are denied to an unregistered firm:
A partner cannot file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act
A right arising from a contract cannot be enforced in any Court by or on behalf of your firm against any third party
Further, the firm or any of its partners cannot claim a set-off (i.e. mutual adjustment of debts owed by the disputant parties to one another) or other proceedings in a dispute with a third party.
PARTNERSHIP – QUICK FACTS
A partnership is considered as a separate legal identity (i.e. separate from its owners) in Bangladesh only if the partnership is registered.
All the partners of a partnership are liable severally and jointly for the liability of the partnership.
The concept of Limited Liability Partnership does not exist in Bangladesh.
From a tax perspective, partnerships in Bangladesh are not taxed at the entity level and profits are treated as part of each partners’ personal income and are taxed at personal income tax rates.
MEMBERS & MANAGEMENT
There must be a minimum of 2 partners and maximum of 20 partners.
The partners can be natural persons or companies.
Unlike private or public limited companies, a partnership in Bangladesh does not have directors, shareholder or secretary, instead the partners own and run the business.
PARTNERSHIP – DOCUMENTS REQUIRED
In order to register a partnership in Bangladesh, the following information/documents are needed:
Proposed partnership name;
Partnership agreement duly notarized;
Particulars of the partners;
Residential address of the partners;
Details of the registered address for the partnership; and
Percentage of the share of profit of each partner.
PARTNERSHIP – REGISTRATION PROCEDURE
A partnership may be registered with Registrar of Joint Stock Companies and Firm of Bangladesh (“RJSC”).
The partnership registration process consists of two steps: a) name reservation; and b) registration of the entity. Under normal circumstances, a partnership registration can be completed within one/two days.
STEP 1- CHOOSING THE PARTNERSHIP NAME
The partners are free to choose any name as they desire for their partnership firm subject to the following rules:-
The names must not be too identical or similar to the name of another existing firm doing similar business so as to lead to confusion. The reason for this rule being that the reputation or goodwill of a firm may be injured, if a new firm could adopt an allied name.
The name must not contain certain words expressing or implying the sanction, approval or patronage of Govt.
Once you select a name, you should apply for name clearance using the website of RJSC.
STEP 2 – PREPARE A PARTNERSHIP DEED
You should prepare a partnership deed. Usually, a partnership deed contains the following clauses:
Name and Address of the firm as well as all the partners;
Nature of business to be carried on;
Date of Commencement of business;
Duration of Partnership (whether for a fixed period/indefinite time);
Capital contribution by each partner;
Profit-sharing ratio among the partners;
Rules to be followed in case of retirement, death and admission of a partner; and
The above are the minimum essentials which are required in all partnership deeds. The partners may also mention any additional clauses.
The Partnership Deed should be on a stamp paper in accordance with the Stamp Act and should be signed by all partners. Then it should be notarized.
STEP 3- REGISTER PARTNERSHIP DEED WITH RJSC
The partnership deed and filled up Form I should be filed with RJSC. These documents will be reviewed by the officials of the RJSC. When the officials are satisfied with the points stated in the partnership deed, he shall record an entry of the statement in a register called the Register of Firms and issue a Certificate of Registration.
Various types of business exist in Bangladesh. One of them is Partnership Firm and others are Proprietorship and Limited Company. A Partnership Firm is formed under the provision of the Partnership Act 1932. RJSC (The Registrar of Joint Stock Companies and Firms) is the sole authority to Register Partnership Firm in Bangladesh. For Partnership Registration in Bangladesh we should follow some steps those will discuss at the end of this article.
Especially similar minded or similar professionals two or more people when a business start and create a voluntary agreement with the intention of making and sharing profit among themselves that is called Partnership Business. For form a Partnership Business minimum two and maximum twenty people can include.
Now days for opening Bank Account for Partnership Business, Partnership Registration from RJSC is essential. For this many of the unregistered Partnership Business owner going to register their Partnership Firm from RJSC. On the other hand to get some legal facilities Partnership Business Registration from RJSC is mandatory.
Partnership Agreement is well known as the Partnership Deed. Usually, following terms and conditions are including in a Partnership Deed:
- Name, Present Address, Permanent Address of the Partner.
- Name of the Partnership Firm
- Nature of Business
- Business Address
- Duration of Partnership
- Share of profit taken by each Partner
- Amount of capital contribution of each partner
- Terms of Retirement
- Mode of Management
- Interest of Borrowings
- Dissolution of Partnership
Steps of Partnership Registration in Bangladesh:
A partnership firm can be registered at the time of creation or even subsequently. An application should file to the RJSC where following information should include:
- Take Name Clearance Certificateof the Partnership Firm
- Date of Establishment of the Partnership Firm
- Duration of the Partnership Firm
- Principal place of business with full Address
- Joining Date of Partners
- Particulars of Partners
- Particulars of Business
- The application must be submitted on the prescribed Form- I
We are suggesting you register your existing Partnership Firm immediately for avoiding unexpected circumstances. Also if you start a new partnership firm you must be Registration at RJSC in Bangladesh. To know more about RJSC.
Benefits of Partnership Business:
For the nature of business start-up capital funds by the partners, so the more partners, the more capital they can invest in their business, which will permit more flexibility and more potential for progress.
A partnership firm is usually easier to register, run, and manage. For partnership firms, Rules and Regulations are not strictly regulated than companies. As long as all the partners can agree, they run their business as they like.
Every partner brings new ideas and skills to a business. Easier to make a decision for solving a problem because of more brains to think about it. Every partner can share their duties and responsibilities for the business.
After completing Partnership Registration in Bangladesh to start operation your business you should get the following documents:
- Trade License
- TIN Certificate for your newly Registered Partnership Firm.
- Bank Account
- VAT Registration Certificate
- Import Registration Certificate(In case of Import Business)
- Export Registration Certificate (In case of Export Business)