Step 1: Discuss and finalize the terms with your partner(s)

Identify the new partner(s) you wish to bring on board.

Discuss and agree on the profit-sharing ratio, capital contribution, roles and responsibilities, and management structure.

Decide whether the existing assets and liabilities of the sole proprietorship will be transferred to the partnership.

Step 2: Prepare the Articles of Incorporation

The Articles of Incorporation are the most important document for establishing a partnership. Include:

Name of the new partnership (you can keep the current business name)
Names and addresses of all partners
Business activities
Capital contribution of each partner
Profit share ratio
Partner obligations and duties
Dispute resolution method
Partner admission or withdrawal clause

Include a clause stating that the new partnership assumes the assets and liabilities of the old sole proprietorship.

Step 3: Apply for a PAN in the partnership’s name

Sole proprietorships use the owner’s PAN.

A partnership must obtain its own PAN from the Income Tax Department.

Apply online through the NSDL or UTIITSL website:

https://www.onlineservices.nsdl.com/paam/endUserRegisterContact.html

Step 4: Register the company (optional, but recommended)

In India, company registration is not mandatory, but it is strongly recommended to avoid future disputes and obtain legal recognition.

Submit the following documentation to your state’s Company Registry:

Application Form 1
Certified copy of the Company’s Memorandum of Association
Proof of company address
Affidavit and NOC from the landlord (if rented premises)
PAN of the company and partners
Proof of identity and address of all partners
Passport-sized photographs

You will receive a Certificate of Registration if accepted.

Step 5: Transfer of Licenses, Registrations, and Assets

Update or transfer all licenses, accounts, and registrations from the owner to the company:

GST Registration: Amend the existing GST or apply for a new one in the company’s name.

Udyam Registration (MSME): Update or re-register the business at https://udyamregistration.gov.in.

Bank Accounts: Close the owner’s account and open a new bank account for the company using:

Partnership Deed
PAN
GST Certificate (if applicable)
Proof of Address

Trademark/Brand Name: Transfer any intellectual property from the owner to the company.