Partnership Firm Registration
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Partnership firm represents a business entity that is formed with a purpose of making a profit from the business. Two or more parties come together with a formal agreement (known as Partnership Deed) to own and manage the business.
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Introduction
What is Partnership Firm ?
A partnership firm is one of the most important forms of a business organization. It is a popular form of business structure in India. A minimum of two persons are required to establish a partnership firm. A partnership firm is where two or more persons come together to establish a business and divide its profits amongst themselves in the agreed ratio. The partnership business includes any kind of trade, occupation and profession.
The Indian Partnership Act, 1932 governs and regulates partnership firms in India. The persons who come together to form the partnership firm are knowns as partners. The partnership firm is constituted under a contract between the partners. The contract between the partners is known as a partnership deed which regulates the relationship among the partners and also between the partners and the partnership firm.
Benefits
Benefit of Partnership Firm Registration
Shared Responsibilities
The word Partnership itself describes individuals coming together for some common business object. The partners share the responsibility to work and manage the business together. Responsibilities for a particular field or task can be assigned to one or more partners by indicating the same in a Partnership Deed.
Operating Flexibility
A Partnership firm is operated on the basis of the Partnership deed executed by the partners, mutually. The partners can decide how to operate the business with their mutual consent. Also, the Partnership Deed can be changed according to the requirement even after partnership deed registration is completed. There are no limitations or restrictions on the partners in regards to running the business, as long as it is covered under the signed agreement.
Pre-defined Object or Period
At the time of registering a Partnership firm, the deed enumerates the pre-defined business objectives and activities, which is the main aim to commence business. A partnership can be formed within a specified period or to complete a specific project or object. Once the same is completed, the partnership will automatically stand dissolved.
Various Financial Returns to the Partners
Partners involved with the firm get various types of returns for their capital as well as their individual efforts. The working partner also receives remuneration in addition to the interest on capital and share of profit, as may be agreed by the partners. Also, the share of profit from partnership firm is exempt for the partner receiving it.
Process
Partnership Firm Registration Process In Easy Steps
How to Decide a Company Name
Unique Name
A unique name helps to recognise the Partnership distinctly and build brand value
Business Object
A part of name should suggest the business activity of the firm
Short and Simple
The name should not be unnecessarily long and should be simple to spell and remember.
Documents required
Documents required for Partnership Firm Registration
Faq
Frequently Asked Questions (FAQ)
Formation of Partnership Firm does not require any minimum amount. It can be started with any amount of capital contribution by the partners. The Partners can contribute in any amount agreed and in any form being tangible (cash, premise) or intangible (goodwill, intellectual property). The Partners can introduce capital in any ratio, equal or uneven.
Partnership firms do not need to prepare audited statements for each year. However depending on the turnover and a few other criteria, a tax audit statement might be necessary.
A partnership firm can be converted to a Private Limited Company or a LLP considering its requirements. However, the procedures to convert a Partnership firm into a Company or LLP are cumbersome, expensive and time-consuming. Thus, it is wise for many entrepreneurs to consider and start a LLP or Company instead of a Partnership firm.
Only a registered partnership firm can claim a set off (i.e. mutual adjustment of debts owned by the disputant parties to one another) or other proceedings in a dispute with a third party. Hence, it is advisable for partnership firms to get it registered sooner or later. Also, only a registered partnership firm can file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act. An unregistered Partnership Firm can get registered at any point of time after its establishment.
Applying for the PAN and TAN is possible after the execution of a Partnership Firm Agreement or after partnership deed registration with respected RoF. The physical copy of the PAN will be received at the registered Business Place only after being dispatched by the Income Tax Department.
Partnership firms do not need to prepare audited statements for each year. However depending on the turnover and a few other criteria, a tax audit statement might be necessary.
