In the case of proprietorship firm, there is no registration required. As there is no procedure to make application for availability of name (as in the case of companies) applicable, you simply have to open a bank account with the name & style you want to work. But if your business is liable for VAT and / or Service Tax registration, then you have to obtain VAT and / or Service Tax registration. Further, for sole proprietorship, no separate income tax PAN is required. The PAN of the proprietor will be the PAN of the firm and proprietor will have to file income tax return in his personal name.
A Partnership is defined by the Indian Partnership Act, 1932, 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, viz.
there must be an agreement entered into orally or in writing by the persons who desire to form a partnership,
the object of the agreement must be to share the profits of business intended to be carried on by the partnership, and
the business must be carried on by all the partners or by any of them acting for all of them.
Section 4 of the Companies Act, 1956, provides that the number of partners in a firm shall not exceed 20, and a partnership having more than 20 persons will be illegal.
A partnership firm is required to be registered under sections 58 and 59 of the Partnership Act, though it is not compulsory. The main handicap being that a partnership firm or its partner cannot file a suit against a third party.
Every change in the constitution of a partnership is also required to be registered. But if it is not registered, then there are certain handicaps stated in S.69 of the Act.
For the purpose of income tax benefits It is necessary to register a partnership with the Department under S. 184 and S.185 of the Income Tax Act, 1961.