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CA Foundation · Business Laws · The Indian Partnership Act, 1932

Sunita and Tarun run a firm in Jaipur under a written deed but have never applied to the Registrar of Firms. Is the firm's existence or legality affected by this non-registration?

Non-registration does not make the firm illegal or stop it from doing business. Registration under the Partnership Act is voluntary, and the only consequence is a set of disabilities, mainly the inability to file certain suits to enforce contractual rights.

  1. AYes, an unregistered firm is illegal and must be wound up
  2. BYes, an unregistered firm cannot carry on business at all
  3. CNo, registration is not compulsory; non-registration only creates certain disabilities in enforcing claimsCorrect
  4. DNo, but the partners are then personally barred from holding any property

Explanation

Under the Indian Partnership Act, registration of a firm is optional, not mandatory. An unregistered firm is a lawful firm, but it suffers disabilities such as the bar on suing to enforce contractual rights. Hence the view that it is illegal is wrong.

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