Partnership Firm Registration
Partnership Firm RegistrationIt is a partnership when two or more person come together for profit from a business. This structure is best suitable for small and medium scale businesses with an additional benefit of lower compliances.
|Act||Indian Partnership Act, 1932|
|Number of members||2 – 50|
|Separate Legal Entity||No|
|Statutory Audit||Not mandatory|
|Foreign Participation||Not Allowed|
What is Partnership Firm?
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. The risk and responsibilities are shared amongst the partners that shred the burden of an individual partner. Also, when two comes together, more capital and expertise are combined that helps to reach the business goal(s) easily.
Partnership Act, 1932 defines the structure of a Partnership firm by providing all the necessary provisions to run the same. The Act validates both registered and unregistered partnership firms in India. However, an unregistered partnership has few shortcomings that attract partners towards Partnership Firm Registration. But, one can overcome it by registration firm anytime after it is formed.
PAN & TAN
Benefits of Partnership Firm
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.
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.
No Annual Returns
There is no need to submit an annual return to the Ministry of Corporate Affairs. If we compare partnership firm with Limited Liability Partnership, then we do not have to file an annual return in the Partnership firm to the ministry of Corporate Affairs, while we have to fulfill many compliances in the Limited Liability Partnership.
Sharing of Risk
One of the most significant advantages of the partnership firm is that the risk gets equalized in all the partners. As there are multiple partners in a partnership, so the risk gets balanced.
Easy to Dissolve
A partnership business can be dissolved after making the agreement between partners regarding the dissolution of the business. The dissolution of the partnership does not require any complex legal proceedings.
No statutory Audit
One of the significant advantages of a Partnership firm is, there is no requirement of a Statuary Audit. Therefore a Partnership Firm is not required to get its books of account audited. You may have to check your book of mind if there is any requirement of Income Tax Act. Sometimes it is required by the Income Tax Department.
Documents required for formation of a Partnership Firm
Minimum 2 Partners
Name of Firm
A self-attested copy of PAN Card of all partners
Partners Address Proof
Self- attested copy of Aadhar Card and Voter ID/ Passport/ Driving License of all partners
Business Address Proof
Utility Bill (Electricity Bill) of the place of business
Rent Agreement and NOC from the owner of the place of business, if rented
Establish Partnership in 3 Easy Steps
1. Answer Quick Questions
- Pick a Package that best fits your requirements
- Fill in our questionnaire that takes less than 10 minutes
- Provide basic details & documents required for registration
- Make payment through secured payment gateways
2. Experts are Here to Help
- Assigned Relationship Manager
- Drafting a Partnership Deed
- Payment of Stamp Duty on Deed
- Notary of Partnership Deed
- Application for PAN and TAN
3. Establishing a Partnership Firm
- All it takes is 12 working days*
Process to establish Partnership Firm
- Discussion and collection of basic Information
- Providing Required Documents for Partnership firm registration
Day 2 - 4
- Drafting a Partnership Deed
- Review and confirmation from Partners
Day 5 - 7
- Payment of Stamp Duty on the agreement
- Partnership Deed Notarisation
- Application for allotment of PAN and TAN
Day 8 onwards
- Partnership Deed registration, if subscribed
- Certificate of Registration from RoF*
Compare different business structures to choose the right entity type
|Partnership Firm Registration||LLP Registration||Private Limited Company||One Person Company Registration||Sole Proprietorship Firm Registration||Section 8 Company||Public Limited Company Registration||Nidhi Company Registration|
|Act||Indian Partnership Act, 1932||Limited Liability Partnership Act, 2008||Companies Act, 2013||Companies Act, 2013||No specified Act||No specified Act||Companies Act, 2013||Companies Act, 2013|
|Number of members||2 – 50||2 – Unlimited||2 – 200||Only 1||Only 1||Only 1||Unlimited||Unlimited|
|Separate Legal Entity||No||Yes||Yes||Yes||No||No||Yes||Yes|
|Statutory Audit||Not mandatory||Dependent||Mandatory||Mandatory||Not mandatory||Not mandatory||Mandatory||Mandatory|
|Foreign Participation||Not Allowed||Allowed||Allowed||Not Allowed||Not Allowed||Not Allowed||Allowed||Allowed|
The formation and Registration of a Partnership Firm in India
Whether Partnership Deed registration is compulsory?
The Partnership Act provides that both registered and unregistered partnerships are valid and recognised by law. Partnership registration is not compulsory but is beneficial due to effects of non-registration. Mostly, the businesses at initial level prefer unregistered partnership till they reach stable level. The unregistered partnership can be registered at any time after its formation.
What is the minimum capital requirement to start a Partnership Firm?
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.
What are the effects of non-registration of Partnership?
Due to non-registration, the firm cannot file suit against any partner or the third party. A partner also cannot sue the partnership firm for his claim. However, the third parties can sue the firm to enforce their dues or claims. Non-registration does not affect the rights of third parties. Also, the partnership can be registered any time after formation to remove the said effects.
How many persons are required to register a partnership firm? Is there any specified requirement to become partner?
It is possible to form a partnership firm with only two partners by following the process described. Further, the Partner to be introduced and appointed in the Firm must be an Indian resident and citizen. NRI and Persons of Indian Origin can only invest in a Partnership with prior approval of the Government. The individual must be competent to contract and not a minor. A minor can be introduced to a Partnership Firm only for profit.
What are the advantages of a registered 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.
Under which Government Authority is the application of Partnership Firm Registration submitted?
The application for Partnership Firm Registration in India is submitted with the Registrar of Firms (RoF) under whose jurisdiction the Place of Business of Partnership Firm falls. The application of Registration is made in required form along with submitting the Partnership Deed. At the end of the registration procedure, the Certificate of Registration is issued by respective RoF. The process and time of registration may differ for each RoF.
Which points should be considered by all the Partners while drafting Partnership Deed?
The Partners should specifically mention about the main object and activities along with major clauses related to capital contribution, profit sharing ratio of the partners, management and administration of Partnership Firm. Further, the signed Partnership Deed shall be duly stamped and notarized.
What is the amount of Stamp duty payable on Partnership Deed?
To confirm the validity of the partnership deed, the partners must pay stamp duty required as per the capital of the firm. The amount of stamp duty payable depends on the amount of capital contribution by partners. The rate of duty is prescribed under State Stamp Act and which is different for every State.
Whether the notarisation of the Partnership Deed is necessary?
Yes, notary on Partnership Deed is necessary in every case for an unregistered or registered partnership firm.
When can the partnership firm apply for PAN and TAN?
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.
How long does it take to register a Partnership Firm in India?
The registration of Partnership Firm in India can take 12 to 14 working days. However, the issuance of Registration Certificate can take place as per the regulations of the concerned state. The time period for registration of Partnership Firm is subject to Government processing time and that varies for every State.
What are the compliance requirements for Partnership Firm?
The Partnership Firm shall maintain the Books of Accounts and Financial Statement. The Income Tax Return shall be filed for the respective financial year before the due date as per the Income Tax Act.
Whether audit is required for Partnership Firm?
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.
Can a Partnership Firm be converted into a Private Limited Company or LLP?
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.