Partnership Firm Registration
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What is a Partnership Firm?
APartnership is a relationship between people who have agreed to share profits of a business carried on by all or any of them acting for all. Owners of this partnership are called Partners and they collectively form a Partnership firm. Minimum requirement of people to form a partnership firm is 2. In case of a partnership firm, the liability of partners is unlimited and there is limitation on transferability of shares subject to the consent of other partners.
Process of Partnership firm Registration
Name for Partnership firm
A name should be selected for the firm that does not resemble any other firm that is already public. Also, it should not be similar or identical to existing company doing the same business. The validity of the name can be checked from MCA website.
Drafting of Partnership Deed
The deed should be drafted containing all the necessary information of the partners, capital, nature of business, profit loss sharing ratio, etc. It should also contain details about remuneration payable to partners.
Submission of Documents
Firstly an application for PAN has to be made to IT Department. Then a registration application containing the details of the business and all other documents as necessary shall also be submitted to the Registrar.
Obtain Registration Certificate
After paying registration fees & stamp duties, the deed would be finalized and after thorough examination of the documents, the Registrar will issue a Registration certificate.
Advantages of Partnership Firm Registration
Easy to Form
Any 2 people can form a partnership firm. Registration is not compulsory to start a partnership firm hence it is easy to form but when legal procedure comes into picture, e.g. opening of a bank account of partnership firm, then a written partnership deed would be required and further registration would also be required.
Substantial Creditworthiness
When a proposal is being evaluated for a Loan, the lender looks into the creditworthiness of the borrower. In a partnership firm, all partners are liable for the debt taken by the firm and the personal assets of the partners can also be used to recover the debt amount. Hence this gives confidence to the lenders which in turn results in raising capital for the business.
Good Administration
As there are many partners involved in the operation of a business, the firm can distribute the duties and responsibilities to each partner as per their qualifications and suitability. It helps in promoting efficacy of the firm.
Speed-breaker for hasty decisions
As liability of partners is unlimited, the partners tend to be careful in taking business decisions. The partners discuss the circumstances and arrive at a balanced judgement. So there is clearly a speed-breaker for hasty decisions.
Documents required for Partnership Firm Registration
- PAN Card
Copy of PAN card of all partners
- Registered Office Proof
Rental agreement if the premises are rented or proof of ownership of place of business (Electricity Bill, Water Bill and Property Tax).
- Photograph
Recent passport size photograph of all partners
Types of partnerships
- General partnership -- This is the most basic form of partnership. Here forming a business entity with the state is not required. Ownership and profits are distributed evenly among the partners. In a general partnership, all partners have independent binding on business to contracts and loans. All partners are personally responsible for all of the business's debts and legal obligations. General partnerships are easy to form and dissolve.
- Limited partnership -- These are formal business entities authorized by the state. They have one general partner who is fully responsible for the business and one or more silent partners. Limited partners in this form of partnership invest in the business for financial returns and are not responsible for its debts and liabilities.
- Limited liability partnership -- A limited liability partnership (LLP) is one in which all partners actively manage the business, but it limits their liability for one another's actions. The partners are fully responsible for the debts and legal liabilities of the business.
Pre requirements for Partnership Firm Registration
- Minimum requirement of people to form a partnership firm is 2, whereas the maximum number of members in case of partnership firm can be up to 100.
Packages
Basic
What's included
- Partnership Registration
- Partnership Deed Drafting
- PAN Application
- Expert Consultancy
Basic
What's included
- Partnership Registration
- Partnership Deed Drafting
- PAN Application Filing
- GST Registration
- Udyam Registration
- Expert Consultancy
Frequently asked questions
Is partnership deed mandatory to be in writing?
It is not compulsory for a partnership deed to be in writing. It can also be oral. However, in absence of partnership deed, partners are not allowed to draw a salary. Instead, they share the profits and losses in the business equally.
What is the minimum and maximum no. of partners a partnership can have?
It requires a minimum of two persons to start a Partnership firm. A maximum number of 20 Partners are allowed in a Partnership firm.
Can a non resident become a partner in an Indian firm?
A Non-Resident Indian and Person of Indian Origin can only invest in a partnership with prior approval of the Government of India.
Can a minor become a partner?
No, a minor cannot become a partner. However, he can be admitted to the benefits of the partnership firm with the consent of the other partners but he is not personally liable for the losses of the firm.
What are the tax compliances of partnership firms?
The partnerships are required to file their income tax return in FORM ITR-5. In addition to this, partnership firms are supposed to comply with TDS regulations, GST regulations, ESI regulations etc.