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 owned 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.