Registration of a partnership firm is not compulsory under law. However, the registration gives the firm a legal status. Section 69 makes claims arising out of a contract unenforceable if the firm is unregistered at the date of the institution of the suit. Thus, the major drawback of the non-registered partnership firm is that it has no right to sue any third parties in its own name. It cannot even file suit against any of its partners.
If a partner of the firm wishes to sue the co-partners or the firm itself in the court of law, two conditions are necessarily fulfilled. First of all, the firm must be a registered one and secondly the name of the partner suing must appear in the registration records. Hence, a partner of a non-registered firm will be unable to file legal suit against the firm or against co-partners to enforce his right in case of disputes.
In case of unregistered partnership firm, the incoming partner has to unknowingly rely on the trustworthiness of the other partners, as he cannot enforce his right against them in the court of law.
The unregistered firm cannot claim tax benefits in its name under the provisions of Income Tax Acts
Related article: What are the advantages of registered partnership firm?
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