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shivkumar (proprietor)     02 September 2010

Converting Proprietorship firm in to Partnership firm

A person X is running a profitable business under his Proprietorship.He want a person Y (Relative or Outsider) to join his business as a Partner.Please guide the complete procedure for the conversion of  Proprietorship firm in to Partnership firm & also inform about the Legal documents/Deeds needed to be executed.


 12 Replies

A V Vishal (Advocate)     02 September 2010

A Proprietorship concern can be converted into the a partnership following the below procedure:

1) Minimum 2 members(partners) to be there to form a partnership

2) By mutual understandings of the partners a deed as to be prepared as per Indian Partnership Act, 1932

3) The partership can be registered under the Indian Partnership Act, 1932

4) If your proprietory concern is registered under various act(s) like Sales Tax, Service Tax or other, then concerned forms to be submitted accordingly to change the status of your firm/business.

5) A seperate PAN has be obtained by the Income Tax Department and accordingly the IT Returns has be to filed. And after conversion to partnership the assets & liabilities of the firm of proprietory concern can be transferred to the firm's name.

Shihab,Corporate Lawyer (LL.B M.B.A Corporate Lawyer and Management Consultant)     03 September 2010

There should be minimum two persons.You have to execute a Partnership deed in Stamp paper with Proper value.If you have any registrations like VAT or CST acknowledge the departments the upgradation of your business firm.

Susmita Sinha (TA)     22 September 2010

  I am new member to Lawyers club India. I have some queries regarding conversion proprietorship firm into a partnership frim.If the partners do not want to contribute any money during formation of the partnership firm from proprietorship firm, will the partnership still be valid.Only the proprietor invest his proprietorship firm capital in new partnership firm.Please explain in details.Thanks.......

Shihab,Corporate Lawyer (LL.B M.B.A Corporate Lawyer and Management Consultant)     26 September 2010

It is valid,the partnership agreeement has to state the capital contribution and share distribution from all the partners.

Susmita Sinha (TA)     27 September 2010

I would like to know if the capital was contributed only by one partner who had the proprietorship firm, then share can be equally distributed among all the partners or there is any dependency with capital contribution of each partner with share.If in future any litigation arise can I claim the major share.

BALAGURURAJ (ADVOCATE)     09 December 2010

as far as i know a proprietorship concern cannot convert to a partnership firm. u hav to close this registration and apply a new one . pl confirm it with your commercial tax off.

SACHIN AGARWAL (ADVOCATE)     10 December 2010

Regarding query of Mr. Shiv Kumar


The prosedure informed by Mr. A.V. Vishal is correct and as per law.

SACHIN AGARWAL (ADVOCATE)     10 December 2010

Regarding query of Ms. Susmita Sinha

The capital contribution and profit sharing are two diffrent issues. The person not investing any capital may get the major share in the profits of the firm. There is no bar.

Susmita Sinha (TA)     10 December 2010

I have a query regarding this Converting Proprietorship firm in to Partnership firm.If the partnership agreeement does not state the capital contribution of other partners.Is the partnership deed valid.?After 30 yrs of partnership firm one of the partner(who had theProprietorship firm) found cheated by money by other partners for the past yrs,what steps the person should take at this moment?

CHANDRAKANT (LAWYER)     24 February 2014

Dear Sir,

Regarding Proprietorship firm convert to partnership firm, my questions are as under and kindly request positively and lawfully answer at earliest:

1. suppose proprietorship firm borrowed the fund from financial institution ;

2.suppose stamp duty burden or fresh documentation;

3.suppose mortgaged stamp duty burden;

4.the financial institution strictly called proprietorship convert to partnership as per RBI Policy or Bank Policy

5.all applicable registration in Government fresh 

Gulshan Kumar Sinha (director)     28 July 2014

Dear Sir,

My question is my friend is already having a business and I want to Join him. But  he is having this business in his own name and trade license is proprietor trade license. if we want to convert into partnership do we have to apply for a new trade license or else that will work. if that will work what are the things we need to do.pls reply



Gulshan Sinha

Mak (CEO)     05 August 2014

What happens in the following situation:

I have been running a partnership business since 1 year. but i never got it registered and never did any documentation. Continued the business as Sole Propriertership.


Now i wish to fix things up. How can i do documentation back 1 year and state that the partnership was formed in April 2013 but no documentation/registeration was done till now. How do i rectify this?

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