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Establishing a Partnership Firm in Bangladesh

Table of Contents

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.

For practical reason, foreign investor cannot setup a partnership firm in Bangladesh. This is different from setting up a joint venture for implementing a project in Bangladesh.

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:

  1. there must be an agreement entered into orally or in writing by the persons who desire to form a partnership,
  2. the object of the agreement must be to share the profits of business intended to be carried on by the partnership, and
  3. 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.

Registration not mandatory
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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
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Liability
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  • 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.

Taxation
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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
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  • 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
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In order to register a partnership in Bangladesh, the following information/documents are needed:

  • Proposed partnership name;
  • Partnership agreement duly notarized;
  • Form I;
  • 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.

Partnership – Registration Procedure
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A partnership may be registered with the Registrar of Joint Stock Companies and Firms of Bangladesh (“RJSC”).

The partnership registration process involves several key stages. Under normal circumstances, registration can typically be completed within one or two working days following the submission of all required documentation.

graph TD; A["Step 1: Choose Partnership Name"] --> B{"Apply for Name Clearance via RJSC Portal"}; B -- "Approved" --> C["Step 2: Prepare Partnership Deed (Notarised on Stamp Paper)"]; B -- "Rejected" --> A; C --> D["Step 3: File Deed & Form I with RJSC"]; D --> E{"RJSC Scrutiny & Verification"}; E -- "Queries Raised" --> D; E -- "Approved" --> F["Receive Certificate of Registration"]; F --> G["Step 4: Obtain Trade Licence, TIN, etc."]; G --> H["End: Partnership Registered & Operational"];

Step 1- Choosing the Partnership Name
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The partners are free to choose any name they desire for their partnership firm, subject to the following rules:

  • The name must not be too identical or similar to that of another existing firm conducting similar business, as this could lead to confusion. This rule exists because the reputation or goodwill of an established firm might be harmed if a new firm adopts a closely allied name.
  • The name must not contain certain words expressing or implying the sanction, approval, or patronage of the Government.

Once a name is selected, an application for name clearance should be submitted via the RJSC website.

Step 2 – prepare a Partnership Deed
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You should prepare a partnership deed. Usually, a partnership deed contains the following clauses:

  • Name and Address of the firm as well as all the partners;
  • Nature of business to be carried on;
  • Date of Commencement of business;
  • Duration of Partnership (whether for a fixed period/indefinite time);
  • Capital contribution by each partner;
  • Profit sharing ratio among the partners;
  • Rules to be followed in case of retirement, death and admission of a partner; and
  • The above are the minimum essentials which are required in all partnership deeds. The partners may also mention any additional clauses.

The Partnership Deed should be on a stamp paper in accordance with the Stamp Act and should be signed by all partners. Then it should be notarized.

Step 3- Register Partnership deed with RJSC
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The partnership deed and filled up Form I should be filed with RJSC. These documents will be reviewed by the officials of the RJSC. When the officials are satisfied with the points stated in the partnership deed, he shall record an entry of the statement in a register called the Register of Firms and issue a Certificate of Registration.

Obtaining Trade License and other licenses
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After the registration of the firm with RJSC or in case of unregistered firm, after the singing of the partnership deed, the firm should obtain Trade License and TIN and other required licenses as required.

Key Contact

For assistance with partnership formation and registration, please contact: