Establishing partnership firms in Bangladesh In Bangladesh among various types of businesses, a partnership firm is formed under the provision of the Partnership Act 1932. Under Section 4 of the Act, “Partnership” is defined as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Additionally, to start a partnership firm minimum two and maximum of fifty partners are required.

The partnership firms are divided into two categories, i.e., general partnership and limited partnership. In general partnership firm, all the partners or a partner on behalf of all would take part in the business management and activities.

Moreover, the general partnership is divided into two categories, namely, voluntary and specified/special partnership.
A partnership would be a voluntary one if the partnership deed does not contain the duration of the partnership business. On the other side, while a partnership firm is established for a specified time for achieving certain objectives, such partnership is known to be specified as to their nature, and while the objective of such partnership is achieved, it automatically converts into a voluntary partnership.

For the establishment of a partnership firm, there should be an oral or written Partnership Agreement or deed among the partners having an intention to share their capital, expertise and resources and also sharing the responsibility of profit as well as loss. However, a written agreement is always preferable and is needed in case if you wish to register the partnership. This agreement will be considered as the constitution of the partnership firm and all the business activities, management and financial distribution has to be exercised by the said agreement.

Along with the common goals and understandings among the partners, the partnership agreement should also contain the following information;

v Names and permanent addresses of the partners;
v Name and address of the partnership firm;
v Amount of capital contributed by each partner;
v Duration of partnership;
v Share of profit distributed to each partner;
v Management of the partnership firm;
v Terms for retirement, change or addition of partners;
v Dissolution of partnership;
v Banking authority, and
v The signing of the agreement.

Subsequently, after the agreement is made, it requires to be registered with the Registrar of Joint Stock Companies and Firms (RJSC&F) as per the provision of the Partnership Act 1932. Although a registered partnership firm will have the right to enjoy legal facilities but such registration of the firm will not make it a legal entity, as the firm will not be able to enter into agreement or file a suit on its name rather the partners or one of the partners has to do such on behalf of the firm.
Before registering a firm, one has to decide a name for the firm, but that name has to be an unregistered or unused name, so after getting a name clearance one has to pay an amount to a bank, to reserve the name of the firm. Simultaneously after the name clearance, one has to create a deed or agreement of partnership which should be written on the non-judicial stamp valued 2000 taka if the capital of the partnership is more than Taka fifty thousand. However, if the capital is up to Taka fifty thousand, then the stamp value should be Taka one thousand as per the Stamp Act 1899.
Further, the deed or agreement of the partnership requires to be notarized from a notary public. Following to that, one has to pay an amount to RJSC&F for the registration of the partnership firm. 

While registering one has to provide the following documents:
v Name clearance document;
v Payment document for registration;
v Copy of the deed of the agreement;
v National ID and photos of the partners, and
v Any other relevant documents, depending on the type of business
Once the registration of the partnership firm is done, one needs to procure the following documents:
v Trade License from the concerned authority;
v TIN (Tax Identification Number) from NBR;
v Bank Account;
v VAT registration certificate;
v Import registration certificate (in case of import business); and
v Export registration certificate (in case of an export business)
Predominantly, the partnership firms are effortless to register as well as to manage. These firms could be operated without any regulatory compliance requirements. The common goals and understanding among the partners is the sole tool for such firms to run and operate.
Besides, in a partnership firm, due to the involvement of several partners, there is more potential for progress, as each partner can contribute their skills and ideas, which would eventually help the business to grow.
Furthermore, there is the benefit of joint responsibilities and duties among the partners which would diminish the individual liability. Even the burden of providing the capital for the business would be distributed among the partners.
Hence, undoubtedly partnership firm is one of the most suitable options for anyone who might be thinking about setting up their business in Bangladesh.
Nooreen Nawal Priyanka is with Legal Counsel

Law Column is authored by the associates of Legal Counsel which is one of the leading full-service corporate law chambers of Bangladesh having core expertise in corporate and commercial law, employment and labour law, family law, property law, corporate taxation and so forth.
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