Planning to begin a partnership business in Sri Lanka? Are you having difficulties knowing how to register the trademark? Here you will find all the information you require about forming a partnership, registering, what you gain and lose, preparing a partnership agreement and staying in compliance – all for 2025.
What is the meaning of a Partnership in Sri Lanka?
Starting a partnership business in Sri Lanka is made easy by choosing a partnership. A partnership is described as such under Partnership Act No. 18 of 1890.
“The tie that forms when people in business work together for their profit.”
Thus, people who form a partnership decide to work together, sharing the earned money and the tasks involved. If the business is not earning money or has debts, each partner is required to pay what is owed out of their own income.
Advantages and Disadvantages of a Partnership
While partners can operate without registration, it can be more beneficial for them to do so. Here are some points to consider about the positives and negatives of a partnership business:
| Advantages | Disadvantages |
| Simple formation process: Easy to begin and control the business. | Limited lifespan: it can close once a partner dies. |
| Easier access to funds: It is easier for partners to get loans and funding. | Individual tax burden: Partners pay taxes individually on income. |
| Diverse expertise: Combines different skills and knowledge. | Potential conflicts: Disagreements can happen without clear rules. |
| Shared responsibilities: Shared tasks and responsibilities. | Unlimited liability: Partners are fully liable for debts. |
| Better decision making: Teamwork helps in decision-making. | Risk from partner’s actions: One partner’s actions can legally affect all. |
| Common goal: Partners aim for the same business goals. | Personal liability: No protection like in a limited company. |
Should You Go With a Partnership?
If you’re prepared to manage risk and practices with someone, choosing a partnership business is wise. If you aim to protect your investments and maintain a stable company, you may consider registering a Private Limited Company.
Partnership vs. Different Businesses are Found in Sri Lanka
Differences between a Partnership and Sole Proprietorship
| Feature | Partnership | Sole Proprietorship |
| Ownership | 2-50 partners | One person |
| Liability | Shared and unlimited | Owner is fully responsible |
| Legal Entity | Not separate from owners | Not separate from the owner |
| Profit Sharing | Split as agreed | All profits go to the owner |
| Registration | Optional, but advised | Optional |
| Continuity | Ends if partner leaves or dies | Ends with owner’s death |
| Capital | More scope for raising funds | Limited to personal funds |
| Decision Making | Shared decisions | Limited to personal funds |
Partnership vs Private Limited Company
| Feature | Partnership | Private Limited Company |
| Governing Law | Partnership Act 1890 | Companies Act No. 7 of 2007 |
| Registration | Not required | required |
| Legal Status | No separate legal entity | Separate legal entity |
| Liability | Unlimited for partners | Limited to share capital |
| Continuity | Ends with partner changes | Perpetual existence |
| Capital | Limited to partners’ funds | Can issue shares for funding |
| Management | Managed by partners | Managed by directors |
| Audit Requirement | No mandatory audit | Mandatory audit by qualified auditor |
| Transfer of Ownership | Requires partner consent | Shares transferable freely (unless restricted) |
Partners get a straightforward and low-cost set-up, but must accept being liable for each other. You may want to trust a Private Limited Company for greater security and opportunities.
Follow this guide to register a partnership in Sri Lanka.
The first thing to do is get and complete the application form to register your partnership business.
Get the Form for Partnership Registration from the office of the Divisional Secretariat in your business district. Include information such as:
- All partners should provide their names and NIC numbers.
- The name and place of the business
- Ways in which the business is conducting activities
After that, gather and submit the papers needed for the process.
You’ll need:
- For each partner, there should be a copy of their NIC.
- A document showing your business’s address
- A duplicate of your land deed (when the place is yours)
- Sketch out a rental contract with the landlord (when renting).
- In case the property is owned by your family, have a copy of their NIC as well.
- Get a trade permit from your local council if it is required.
- It is important to have a written agreement (partnership agreement) between the partnership owners.
Additional Industry-Specific Documents
| Business Type | Additional Documents Required |
| Selling goods / Import-export | List of items to be traded/manufactured |
| Spas / Guest Houses | Police division report |
| Medicines / Perfumes | Approval from Medical Supplies Division (Ministry of Health) |
| Ayurvedic Treatments | Letter from Ayurvedic doctor + ID from Ayurvedic Medical Council |
| Vocational Training | Copies of professional qualification certificates |
| Beauty Salons / Spas | Training certificates |
| Nurseries / Care Centers | Approval from Early Childhood Development Assistant |
| Restaurants / Cafes | Approval from Public Health Inspector (PHI) |
In step 3, gather the Grama Niladhari Report.
- If you own land, you should present the land deed.
- Consent letter should be given together with the NIC when taking money from family land/property.
- If you have rented the property, there will be a rental agreement.
After that, send everything to the Divisional Secretariat.
Bring your completed papers and report from Grama Niladhari to the Divisional Secretariat Office. Upon verification of all the details, you will receive the Partnership Registration Certificate.
Why It Is Important to Prepare a Partnership Agreement
While it’s possible to manage a partnership business informally, a written agreement is always safer. When problems arise, a partnership agreement ensures everyone understands the situation.
Positive Points of a Partnership Agreement
- Reduces disagreements by being sure about who is responsible for what
- Explains who will get the profits and who will bear the losses
- Outlines what each person’s responsibility is
- Explains how partners are permitted to join and leave the organization
- Describes how disagreements between partners will be managed and when to end the partnership
The content that should be part of the agreement
- The data related to businesses and their partnerships
- What amount each partner pays
- Participation in a Plan for Sharing Profits/Losses
- The activities and operations of the company
- Policies on withdrawing money from the business
- Earning money from the interest on your money or by withdrawing it
- The pay earned by partners
- The process for bringing new partners aboard or removing some from the business
- Methods of handling disagreements
Tip: It’s best to hire a lawyer to write a strong agreement that protects everyone.
Following the law and overseeing tax affairs
After you’ve finished registering:
- Get a Taxpayer Identification Number (TIN) registered at the Inland Revenue Department
- If your business earns more than the set threshold, you should register for VAT.
- Ensure every partner files their personal taxes on their part of the profit.
It can be smart to ask an expert for advice on tax laws and how you can legally save your money.
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How to Dissolve a Partnership
A partnership business may be ended using any of these methods.
- All partners agree to wrap up the firm.
- The agreement states how a partner gives notice.
- Orders from a court in unusual cases.
Inserting a dissolution provision ensures the process is not complicated.
FAQs
Marriage is recognized in some countries, although it’s best to have it registered.
All the other partners need to agree beforehand.
All partners must share all the responsibility.
Companies can do this more easily, as they are able to issue shares.
Yes, but it is subject to approval and compliance with foreign investment regulations. It’s recommended to consult with a legal expert before forming a partnership business with a foreign national.
Typically, the process can take between 7–14 working days, depending on document readiness and approval timelines at the Divisional Secretariat.
No annual renewal is generally required, but changes in partners, business address, or business name should be reported to the Divisional Secretariat.
Yes, a partnership business can operate under a chosen business name, provided it does not violate existing trademarks or registered names.
While not legally required, it is strongly advisable to open a separate business bank account for your partnership business to maintain financial transparency and simplify tax filing.
Will a Partnership Be the Ideal Path for Your Business?
When people trust one another and want to partner up, a partnership business is perfect for small or medium businesses. It is straightforward to get involved in and control, nevertheless, each person is completely responsible for both debts and legal problems.
Choosing to start a Private Limited Company will provide additional security and better long-term results.
Registering a partnership may require some assistance.
Getting the inception of your partnership business right ensures success later on. Do you need help registering your partnership business or checking other solutions? you can count on us for valuable input without charge.
