Partnership Firm Registration India

Partnership Firm Registration

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OVERVIEW

What is Partnership Firm?

A partnership firm is a business entity formed by two or more individuals who agree to share profits, responsibilities, and risks through a formal agreement called a Partnership Deed. This shared structure reduces the burden on individual partners and brings together more capital and expertise, helping achieve business goals more efficiently.

The Partnership Act, 1932 governs such firms in India, outlining key provisions for their operation. Both registered and unregistered firms are legally recognized, but unregistered firms face certain limitations. These can be resolved by registering the partnership at any time after its formation.

BENEFITS

Benefits of Partnership Firm

Shared Responsibilities

The term “Partnership” signifies individuals uniting for a common business purpose. Partners collectively manage and operate the business, sharing responsibilities. Specific tasks or roles can be assigned to one or more partners, as outlined in the Partnership Deed.

Operating Flexibility

A partnership firm operates based on a Partnership Deed mutually agreed upon by the partners. They have the freedom to decide how the business will be managed through mutual consent. Even after registration, the deed can be modified as needed. There are no restrictions on how partners run the business, provided their actions align with the signed agreement.

Pre-defined Object or Period

During the registration of a partnership firm, the Partnership Deed outlines the predefined business objectives and activities, which serve as the primary purpose of starting the business. A partnership may be established for a fixed duration or to accomplish a specific project or goal. Once that period or objective is fulfilled, the partnership automatically dissolves.

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.

ONLINE REGISTRATION

Documents required for formation of a Partnership Firm

PAN Card

Self-attested PAN card copy of each partner.

Partners Address Proof

Self-attested copy of Aadhaar Card and Voter ID/Passport/Driving License for each partner.

Business Address Proof

Utility bill (electricity bill) of the business premises.

Rent Agreement

Rent Agreement and No Objection Certificate (NOC) from the property owner, if the business premises are rented

How to Choose a Name?

Unique Name

A unique name distinguishes the Partnership and enhances brand value.

Business Object

Part of the name should reflect the firm’s business activity.

Short and Simple

The name should be concise, easy to spell, and memorable.

Online Registration

Establish Partnership in 3 Easy Steps

1. Answer Quick Questions

2. Experts are Here to Help

3. Establishing a Partnership Firm

*Subject to Government processing time

The Process

Process to establish Partnership Firm

Day 1

Day 2 - 4

Day 5 - 7

Day 8 onwards

Private Limited Company

One Person Company

Limited Liability Partnership

Partnership Firm

Proprietorship Firm

Applicable Law

Companies Act, 2013

Limited Liability Partnership Act, 2008

Indian Partnership Act, 1932

No specified Act

Registration

Mandatory

Optional

No

Number of Owners

2 – 200

Only 1

2 – Unlimited

2 – 50

Only 1

Separate Legal Entity

Yes

No

Liability Protection

Limited

Unlimited

Statutory Audit

Mandatory

Based On Applicability

Not Mandatory

Ownership Transferability

Yes

Yes (Restricted)

Yes

Yes (Restricted)

No

Perpetual Existence

Yes

No

Foreign Ownership

Allowed

Not Allowed

Allowed

Not Allowed

Taxability

Moderate

High

Low

Compliance Requirement

High

Moderate

Low

FREQUENTLY ASKED QUESTIONS

The formation and Registration of a Partnership Firm in India

Whether Partnership Deed registration is compulsory?

The Partnership Act recognizes both registered and unregistered partnerships as valid and legally binding. While registration is not mandatory, it offers several advantages, particularly in mitigating the consequences of non-registration. Many businesses, especially in the early stages, opt for an unregistered partnership until they reach a more stable position. However, an unregistered partnership can be formally registered at any time after its formation.

What is the minimum capital requirement to start a Partnership Firm?

A partnership firm can be established without a minimum capital requirement. It can be started with any amount of capital, as agreed upon by the partners. The contributions can be made in various forms, including tangible assets like cash or property, or intangible assets like goodwill or intellectual property. Partners are free to contribute in any ratio, whether equal or unequal.

What are the effects of non-registration of Partnership?

If a partnership firm is not registered, it cannot file a lawsuit against any partner or third party. Similarly, a partner cannot file a claim against the partnership. However, third parties are still able to sue the firm to enforce any dues or claims. The non-registration does not impact the rights of third parties. Additionally, the partnership can be registered at any point after its formation to eliminate these limitations.

How many persons are required to register a partnership firm? Is there any specified requirement to become partner?

A partnership firm can be formed with just two partners by following the outlined process. Additionally, any partner to be introduced and appointed must be an Indian resident and citizen. Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can only invest in a partnership with prior government approval. The individual partners must be competent to contract and cannot be minors. A minor may only be included in the partnership for sharing profits, not for taking on liabilities.

What are the advantages of a registered partnership firm?

Only a registered partnership firm is entitled to claim a set-off (i.e., mutual adjustment of debts between disputing parties) or initiate legal proceedings in a dispute with a third party. Therefore, it is recommended that partnership firms register as soon as possible. Additionally, only a registered firm can file a lawsuit in court against the firm or its partners to enforce any contractual rights or rights granted under the Partnership Act. An unregistered partnership firm has the option to register at any time after its formation.

Under which Government Authority is the application of Partnership Firm Registration submitted?

In India, the application for registering a partnership firm must be submitted to the Registrar of Firms (RoF) within the jurisdiction where the firm’s place of business is located. The registration application should be made in the prescribed form, along with the submission of the Partnership Deed. Upon completion of the registration process, the Registrar will issue a Certificate of Registration. Please note that the registration procedure and timeline may vary depending on the specific RoF.

Which points should be considered by all the Partners while drafting Partnership Deed?

The partners should clearly outline the main objectives and activities of the firm, along with key clauses concerning capital contribution, the profit-sharing ratio, and the management and administration of the partnership. Additionally, the signed Partnership Deed must be properly stamped and notarized to ensure its legal validity.

What is the amount of Stamp duty payable on Partnership Deed?

To validate the partnership deed, the partners must pay the required stamp duty based on the firm’s capital. The stamp duty amount varies according to the capital contribution made by the partners. The duty rates are specified under the State Stamp Act and differ from state to state.

Whether the notarisation of the Partnership Deed is necessary?

Yes, notarization is recommended for the deed to be considered legally valid and enforceable.

When can the partnership firm apply for PAN and TAN?

The application for PAN and TAN can be made after the execution of the Partnership Firm Agreement or after the partnership deed is registered with the relevant Registrar of Firms (RoF). The physical PAN card will be sent to the registered business address once it has been processed and dispatched by the Income Tax Department.

How long does it take to register a Partnership Firm in India?

The registration of a partnership firm in India typically takes around 12 to 14 working days. However, the issuance of the Registration Certificate depends on the regulations of the respective state. The overall registration timeline is subject to government processing, which can vary from state to state.

What are the compliance requirements for Partnership Firm?

The partnership firm is required to maintain proper books of accounts and financial statements. Additionally, the Income Tax Return for the respective financial year must be filed before the due date, as stipulated under the Income Tax Act.

Whether audit is required for Partnership Firm?

Partnership firms are not required to prepare audited financial statements every year. However, depending on factors like turnover and other criteria, a tax audit may be required.

Can a Partnership Firm be converted into a Private Limited Company or LLP?

A partnership firm can be converted into a Private Limited Company or an LLP, depending on its needs. However, the conversion process is often complex, costly, and time-consuming. As a result, many entrepreneurs prefer to start with an LLP or a company from the outset, rather than opting for a partnership firm.

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