- adv.rojen@gmail.com
- Anamnagar Kathmandu
How to Register Partnership Business in Nepal
24
Feb
Table of Contents
Starting a partnership firm in Nepal is simple. However, the legal process must be followed carefully. A partnership business is governed by the Partnership Act 2020 (1964). Registration is not always mandatory, but it is strongly recommended for legal protection and enforceability.
This guide explains the legal requirements, documents, registration steps, tax compliance, and practical issues involved in registering a partnership business in Nepal.
What Is a Partnership Business in Nepal?
A partnership business is formed when two or more persons agree to carry on a business and share profits according to a mutual agreement.
Under Section 2 of the Partnership Act 2020, a partnership is defined as a relation between persons who have agreed to share profits of a business carried on by all or any of them acting for all.
Key features include:
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Minimum two partners
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Maximum 20 partners (except professional firms)
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Profit-sharing agreement
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Mutual agency
Is Partnership Registration Mandatory in Nepal?
Registration is not compulsory under the Partnership Act 2020. However, an unregistered firm cannot:
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File a lawsuit against a third party
-
Enforce contractual rights in court
-
Claim legal remedies easily
Therefore, registration is strongly advised for legal security.
Legal Framework Governing Partnership Registration
Partnership registration in Nepal is governed by:
| Law | Purpose |
|---|---|
| Partnership Act 2020 | Formation and regulation |
| Income Tax Act 2058 | Tax compliance |
| Local Government Operation Act 2074 | Local business registration |
| Industrial Enterprises Act 2076 | Industry classification (if applicable) |
The Department of Commerce, Supplies and Consumer Protection (DCSCP) oversees registration.
Where Is Partnership Business Registered in Nepal?
A partnership firm must be registered at:
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Department of Commerce, Supplies and Consumer Protection (for Kathmandu Valley)
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Office of Cottage and Small Industries (in districts)
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Local municipality for business operation permit
Registration location depends on business type and jurisdiction.
Required Documents for Partnership Registration
The following documents are required:
| Document | Mandatory |
|---|---|
| Application Form | Yes |
| Partnership Deed (Notarized) | Yes |
| Citizenship Copies of Partners | Yes |
| Passport-size Photos | Yes |
| Office Rental Agreement or Ownership Proof | Yes |
| Ward Recommendation Letter | Yes |
| Business Stamp | Required after registration |
The partnership deed must clearly mention capital contribution, profit sharing ratio, rights, and duties.
How to Prepare a Partnership Deed
A partnership deed is the core legal document. It must include:
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Firm name and address
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Nature of business
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Capital contribution of each partner
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Profit and loss sharing ratio
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Management authority
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Dispute resolution clause
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Duration of partnership
Although notarization is not mandatory under the Act, authorities require notarized copies in practice.
Step-by-Step Process to Register Partnership Business in Nepal
Step 1: Name Reservation
A unique firm name must be chosen. It must not conflict with existing registered firms.
Step 2: Draft Partnership Deed
Partners must draft and notarize the deed.
Step 3: Submit Application
Application must be filed with required documents at the registration office.
Step 4: Pay Registration Fee
Fees vary depending on capital investment.
Step 5: Receive Registration Certificate
If approved, the partnership registration certificate is issued.
Government Fees for Partnership Registration
Registration fee depends on capital amount.
| Capital Amount (NPR) | Registration Fee (Approx.) |
|---|---|
| Up to 100,000 | 1,000 |
| 100,000 – 500,000 | 4,500 |
| 500,000 – 1,000,000 | 9,500 |
| Above 1,000,000 | 15,000+ |
Exact fees may vary based on updated government notices.
PAN Registration for Partnership Firm
After registration, the firm must obtain Permanent Account Number (PAN) from the Inland Revenue Office.
PAN is mandatory for:
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Opening bank account
-
Issuing VAT invoices
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Tax filing
Under the Income Tax Act 2058, partnership firms are taxed as separate entities.
Taxation of Partnership Firm in Nepal
Partnership firms are taxed at the applicable corporate tax rate.
| Business Type | Tax Rate |
|---|---|
| Normal Business | 25% |
| Special Industry | 20% or reduced rate (if applicable) |
Additionally, partners are taxed individually on distributed profits depending on structure.
What Are the Advantages of Registering a Partnership?
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Legal recognition
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Ability to sue and be sued
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Increased credibility
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Easier bank financing
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Structured profit sharing
Registration reduces legal disputes among partners.
What Are the Disadvantages of Partnership Business?
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Unlimited liability of partners
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Risk of disputes
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Profit sharing obligation
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Limited scalability
Each partner is jointly and severally liable for firm debts.
What Is the Liability of Partners?
Under Section 18 of the Partnership Act 2020, every partner is liable jointly with other partners for all acts of the firm.
Personal assets may be used to settle business liabilities.
How to Dissolve a Partnership Firm in Nepal?
Dissolution may occur by:
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Mutual agreement
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Expiry of duration
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Death of a partner
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Insolvency
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Court order
Notice must be given to the registration authority.
Frequently Asked Questions
What is the minimum number of partners required?
At least two persons are required.
Where is partnership registered in Kathmandu?
At the Department of Commerce, Supplies and Consumer Protection.
Is a partnership deed compulsory?
Yes. It is essential for registration and dispute prevention.
Can a foreigner become a partner in Nepal?
Yes, subject to Foreign Investment and Technology Transfer Act compliance.
Practical Compliance Tips
Common mistakes include:
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Vague profit-sharing clauses
-
No exit mechanism
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No dispute resolution clause
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Ignoring tax registration
Proper drafting of the partnership deed prevents costly litigation.
Conclusion
Registering a partnership business in Nepal is straightforward. However, legal compliance must be maintained from formation to taxation.
A properly drafted deed and timely registration protect partners from disputes and liability.
Before starting a partnership firm, professional legal consultation is recommended to ensure full compliance with Nepalese law.
