Partnership firm Registration in India
Partnership is a relation amongst the partners who have agreed to share the profit of business carried on by all or any one of them acting for all.” The firms are governed by the Indian Partnership Act, and the duties of partners and rights to operate with each other and third parties are governed through the same.
As a reputable firm of Chartered Accountants in Delhi, we have years of experience in helping our clients in Partnership registration. Since the time of enquiry to arranging documents till submitting these online, we get in touch with you in the entire journey and guide you properly at every step until you can complete all.
Know More about Partnership Firm Registration
A Partnership firm is nothing but a form of business where two or more individuals operate as per the terms and goals set in the Partnership Deed. A partnership is relatively easy to form with minimal compliance as compared to Private Limited Company. Minimum two persons willing to start a Partnership Firm need to enter into an agreement, and that is what popularly known as Partnership Deed. As different states have different stamp duty to impose, the partners need to purchase stamp paper of proper value as applicable in the respective state while creating the Deed. The agreement can be notarized. As the Partnership Act, 1932 suggests, the registration of a Partnership Firm is not necessary, but section 69 of the same act specifies that an unregistered firm shall not be able to recover any sum more than Rs. 100. Therefore, it’s always better to register the Partnership Firm before starting the operation. As the Section 4 of the Indian Partnership Act, 1932 says, Partnership is a relation amongst the partners who have agreed to share the profit of business carried on by all or any one of them acting for all.” The firms are governed by the Indian Partnership Act, and the duties of partners and rights to operate with each other and third parties are governed through the same.
The following can enter into a partnership to form a Partnership Firm,
- Hindu Undivided Family: The head of a Hindu Undivided Family can be a partner in a partnership firm.
- Individual: Any individual who is competent enough to enter into a contract can be a member of a Partnership Firm.
- Company: A Public Limited Company or a Private Limited Company being an artificial legal partner, can participate as a partner in a partnership firm. But the participation needs to be authorized through an article.
- Trustees: Trustees of a family trust, religious trust, or any other religious endowments can take part in a partnership firm if the constitution or objects of trustees does not forbid to the contrary.
Registration of Partnership is not mandatory. It solely depends on the decision of partners, whether to register or not. But there are certain benefits available if a Partnership is registered, which is as follows,
- Registered Partnership Firms can file a case against any third party.
- Partners are also allowed to file a case against the firm or any other partner.
- A registered Partnership Firm can always claim a set-off.
- Statement in Form 1 along with the fees prescribed
- A Notarised True Copy of the Partnership Deed, which should state the following details:
- The name of the firm
- Nature of business operations in the firm
- The primary place of business of the firm
- Name of other places where the firms operate their business
- Date of joining of each partner
- Names in full along with the permanent address of all the partners
- Duration of the firm
- Proof of ownership of the location of the business
- Copy of rent or lease agreement
- A copy of PAN Card of partners
- Copy of Aadhar Card or Voter Identity Card
- Easy to Form: Partnership Firms are formed by a simple contractual agreement between two partners who wish to run an enterprise. Therefore, it’s easier to form a Partnership. Alongside this, the legal formalities and compliance requirements of Partnership is minimal. Also, the registration of Partnership is not obligatory.
- Availability of more Capital: Often or not, sole proprietorship suffers because of the limitation of funds. But Partnerships are less likely to face such problems since there are more than one person providing funds to the business. Alongside this, the borrowing capacity of Partnerships are greater.
- Partnerships combine talent, judgment, and skills: Partnerships have more than one person with decisive power, and all the partners are involved when it comes to decision making. In most of the Partnerships, partners are pooled from various specialized areas, and they do complement each other. e.g., if three persons form a Partnership, it’s more likely that one person takes care of the production, one finance, and the other one marketing. This allows the firm to make collective decisions.
- Diffusion of Risk: When it comes to a sole proprietorship, if there are losses, things become tougher for one person to handle it. But in case of Partnerships, since there are more than one person even if there are losses, it gets diffused among the partners.
- Tax Advantages: No matter what form of business you consider, Partnerships always have the advantages when it comes to taxation.Partnership firms get deductions for salary and interest paid to partners. Therefore, firms are liable to pay tax on reduced amounts of profit.
- Flexibility: Partnerships firms are small, and it’s more likely that the partners are known to each other on a personal level. So, when it comes to making decisions in the changing condition, the partners can do so in quick successions. Whereas giant business organizations can never stifle quickly.
It takes two to seven days to register a Partnership. Day 1: Documentation, selection of the name, drafting of partnership deed, payment of stamp duty Day 2 to 7: Allotment of the PAN number and TAN number
It takes two to seven days to register a Partnership. Day 1: Documentation, selection of the name, drafting of partnership deed, payment of stamp duty Day 2 to 7: Allotment of the PAN number and TAN number
- Preparing the documents
- Drafting of Partnership
- Selecting the best name
- Notarization of Partnership Deed
- Getting PAN Number and TAN Number
- GST Registration
- Taxation formalities
4 step Partnership Registration
When it comes to forming partnerships, it’s less tedious than registering other forms of business. With less obligation, compliance needs are also minimum for Partnerships. Here are steps you need to go through to start your Partnership Firm.
Very first step to form a public Limited company is identification of minimum shareholders who will become subscribers of Memorandum of Association (“MoA”) and Article of Association (“AoA”) and minimum number of directors. Shareholders can be individual, firm or Company. However, only an individual can be appointed as director of the company.
Once you choose the right name, it’s time to prepare the partnership deed. The agreement has to contain all the terms and conditions as per the partners’ discretion. It is upto the choice of the partners, whether to keep certain things orally or written. However, it’s highly advisable to keep every clause written so that no space for future conflict remains. The written agreement should have the following things mentioned:
- Complete details of partners including name, address and other important details
- Nature of the business
- Name & Complete address of the firm
- Date of entering into an agreement, i.e., date of commencing the business;
- Partnership duration;
- Capital Contribution;
- Sharing ratio of profit and loss;
- Persons involved in the Management;
- Voting rights of partners;
- Tax Implications of Taxes;
- Dissolution;
- Interest on capital, loan, etc.;
- Withdrawal;
- Retirement, death, and admission;
- Salaries and commissions
You need to prepare the partnership deed on a stamp paper while paying the necessary stamp duty, as the Indian Stamp Act suggests.
The whole process of registration is pretty straightforward. You need to file an application form to the register, attaching the necessary documents and paying the specified fee. Here are the documents you need to submit,
- Form-1 to apply for the registration
- The original and certified copy of the partnership deed
- The specimen of an affidavit duly filled
- Address proof of the firm
The process to register a Partnership firm can seem to be a bit complex and time-consuming. This is why to help you do the job successfully VJM & Associates LLP keeps an expert pool of professionals specialized in registration of company. We are committed to helping startups, proprietors and entrepreneurs to register a Partnership firm.
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