question_answer

If registration is optional, why do partnership firms willingly go through this legal formality and get themselves registered? Explain.

Answer:

Ans.     However, registration is optional, partnership firms willingly go through this legal formality and get themselves registered because it has some merits:

1. Settlement of Claims: Registered firms can file suit against the third parties. So the rights of registered firms are safeguarded by law. But an un-registered firm or its partner cannot enforce its claim against the third parties or its co-partner.

2. Protection of Rights: The rights and privileges of a new partner are also protected in registered firm. But if the incoming partner fails to register himself, he will incur a great risk, because he will not be in a position to file suit for his dues against his firm or his co-partners.

3. Protection of Property: The property of the retired or deceased partner continues to be liable for the acts firm does after his death or retirement until public notice is served for the change to registrar, So there is strong inducement for partners of registered firms to have the changes noted in the register. But if there is an unregistered firm, the private property of the out-going partner will be considered liable to charge the debts inspite of retirement.

4. Protection to Creditors: Registered firm has to maintain correct, complete and up – to - date record of its partners who will be liable for the obligations of the firm. The statement recorded in the register regarding constitution of firm would afford a strong safeguard against untrue refusal of partnership and the evasion of liability to persons who want to deal with the firm.