It 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.
The Indian Partnership Act of 1932 provides the legal requirements for founding a partnership in the country. This Act specifically outlines the rights and responsibilities of the partners concerning one another and other legal relationships that follow from forming a partnership between partners and third parties.
As a result, the Act defines a partner's and a partnership firm's roles in legal and business agreements that result from and are related to a partnership firm's activities concerning 3rd parties. Compared to earlier essays, this one will go into greater detail about the various facets of managing a partnership in India.
If you are looking for the best platform to get partnership firm registration in Delhi, then TaxClue is one of the best platforms. The fastest-growing business services platform in India, TaxClue, is devoted to assisting entrepreneurs in starting and expanding their businesses quickly and affordably.
Services Covered
Partnership Deed
PAN & TAN
GST
Udhyam Certificate
Benefits of Partnership Firm
A partnership firm can be incorporated with the minimum requirement of two individuals, and the Partnership Act of 1932 governs partnership firms. A Partnership Deed may be used to incorporate it. The Partnership firm has numerous advantages. Some of the points of interest are listed below:
Operational Versatility
One advantage of the partnership firm is that it is somewhat flexible because you do not need to complete many legal formalities until the partnership is established from scratch. The operation of a partnership would be relatively flexible because the partner might expand or contract their firm without any legal stipulation. It is simple for the proprietors of the partner firm to make decisions because they are partners. Compared to other corporate entities, making decisions in a partnership is simple.
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
A yearly return must not be filed with the Ministry of Corporate Affairs. If we compare a partnership firm to a limited liability partnership, the partnership firm does not require us to submit an annual report to the ministry of corporate affairs. However, the limited liability partnership requires us to comply with numerous regulations.
Sharing of Risk
One of the essential advantages of a partnership firm is that the risk is dispersed equitably among all members. A partnership typically has many participants, which helps to spread out the risk.
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.
More Resources
The partnership firm has more resources for business operations than the sole proprietorship because it has more members. As a partnership firm has numerous partners, they can pool their expertise and resources to grow the partnership company.
Higher Capital Contribution
Due to the increased number of participants in a partnership firm, a higher capital contribution can be raised. Because numerous partners are willing to donate, it is simple to raise money. You will benefit from it in many ways because many partners can each obtain a different loan from the bank.
Higher Capital Contribution
Due to the increased number of participants in a partnership firm, a higher capital contribution can be raised. Because numerous partners are willing to donate, it is simple to raise money. You will benefit from it in many ways because many partners can each obtain a different loan from the bank.
No statutory Audit
There is no necessity for a Statutory Audit, which is one of the key benefits of a partnership firm. Therefore, an audit of a Partnership Firm's books of accounts is not required. You might need to double-check your memory if the Income Tax Act has any requirements. The Department of Income Tax may occasionally demand it.
Documents required for formation of a Partnership Firm
Minimum 2 Partners
Name of Firm
Business Name
PAN Card
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
Rent Agreement and NOC from the owner of the place of business, if rented
Process Flow
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
Day 1
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
Registration Requirement
Optional
Mandatory
Mandatory
Mandatory
No
No
Mandatory
Mandatory
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
Liability Protection
Unlimited
Limited
Limited
Limited
Unlimited
Unlimited
Limited
Limited
Statutory Audit
Not mandatory
Dependent
Mandatory
Mandatory
Not mandatory
Not mandatory
Mandatory
Mandatory
Ownership Transferability
No
Yes
Restricted
No
No
No
Unrestricted
Unrestricted
Uninterrupted Existence
No
Yes
Yes
Yes
No
No
Yes
Yes
Foreign Participation
Not Allowed
Allowed
Allowed
Not Allowed
Not Allowed
Not Allowed
Allowed
Allowed
Tax Rates
High
High
Moderate
Moderate
Low
Low
Moderate
Moderate
Statutory Compliances
Less
Moderate
High
Moderate
Less
Less
High
High
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.
