Partnership Firm Registration

Obtaining partnership firm registration is easy process but a significant step, as without acquiring it, partner cannot enforce its rights provided under partnership Act, 1932.

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    Deliverables

    Filling of PAN Application for partnership firm

    Filling of partnership registration form


    Notary and stamping of partnership Deed

    Drafting of partnership Deed

    ACT 1932

    Indian partnership act 1932

    When two or more people associated for the purpose of starting to do a business are partners. Persons who have entered into partnership with one another to carry on a business are individually called “Partners“; collectively called as a “Partnership Firm”; and the name under which their business is carried on is called the “Firm Name”

    A partnership firm is not a separate legal entity distinct from its members. It is merely a collective name given to the individuals composing it. Hence, unlike a company which has a separate legal entity distinct from its members, a firm cannot possess property, neither can it be a debtor or a creditor. It cannot sue or be sued by others.

    It is only for the sake of convenience that in commercial usage terms like “firm’s property”, “employee of the firm”, “suit against the firm” and so on are used, but in the eyes of the law that simply means “property of the partners”, “employees of the partners is relevant to state that for the purposes of levy of taxes, a partnership firm is an entity quite distinct from the partners composing it and is assessable separately. But for all other laws, they are treated as the same because a partnership firm does not have a separate legal entity of its owners” and “a suit against the partners of that firm”.

    Contents of partnership Deed

    A partnership deed may contain any matter relating to the regulation of partnership but all provisions in the deed should be within the limits of Indian partnership Act, 1932. However, A partnership deed contain the following clause:

    • Natural of business
    • Duration of partnership
    • Name of the firm
    • Capital
    • Share of partners in profit and losses
    • Bank account firm
    • Books of account
    • Powers of partners
    • Retirement and expulsion of partners
    • Death of partner
    • Dissolution of firm
    • Settlement of disputes
    Types

    Types of Partnerships

    A partnership is divided into different types depending on the state and where the business operates. Here are some general aspects of the three most common types of partnerships.

    General Partnership

    A general partnership comprises of two or more owners to run a business. In this partnership, each partner represents the firm with equal right. All partners can participate in management activities, decision making, and have the right to control the business. Similarly, profits, debts, and liabilities are equally shared and divided equally.

    In other words, the general partnership definition can be stated as those partnerships where rights and responsibilities are shared equally in terms of management and decision making. Each partner should take full responsibility for the debts and liability incurred by the other partner. If one partner is sued, all the other partners are considered accountable. The creditor or court will hold the partner’s personal assets. Therefore, most of the partners do not opt for this partnership.

    Limited Partnership

    In this partnership, includes both the general and limited partners. The general partner has unlimited liability, manages the business, and the other limited partners. Limited partners have limited control over the business (limited to his investment). They are not associated with the everyday operations of the firm.

    In most of the cases, the limited partners only invest and take a profit share. They do not have any interest in participating in management or decision making. This non-involvement means they do not have the right to compensate the partnership losses from their income tax return.

    Limited Liability Partnership

    In Limited Liability Partnership (LLP), all the partners have limited liability. Each partner is guarded against other partner’s legal and financial mistakes. A limited liability partnership is almost similar to a Limited Liability Company (LLC) but different from a limited partnership or a general partnership.

    Partnership at Will

    Partnership at Will can be defined as when there is no clause mentioned about the expiration of a partnership firm. Under section 7 of the Indian Partnership Act 1932, the two conditions that have to be fulfilled by a firm to become a Partnership at Will are:

    • The partnership agreement should have not any fixed expiration date.
    • No particular determination of the partnership should be mentioned.

    Therefore, if the duration and determination are mentioned in the agreement, then it is not a partnership at will. Also, initially, if the firm had a fixed expiration date, but the operation of the firm continues beyond the mentioned date that it will be considered as a partnership at will.

    Characteristics

    Characteristics of Partnership Firm

    Number of Partners

    Minimum number of person required to start a partnership firm is two and maximum limit is 10 in case of banking business and 20 in case of all other types of business.

    Contractual relationship

    A written agreement known as partnership deed which is signed by all the partners, binds them in a contractual relationship.

    Voluntary Registration

    Registration of partnership firm is not compulsory. Since the registration provides various benefits to the firm thus it is desirable.

    Competence of Partners

    Every partner must be competent enough to enter into the partnership agreement. He should not be minor (in some cases minor can be admitted only to the benefits of the partnership), lunatic or insolvent.

    Sharing of Profit and Loss

    In partnership firm all the profits and losses are shared by the partners in any ratio as agreed. If it is not given then they share it equally.

    Unlimited Liability

    Liability of partners of a partnership firm is unlimited. They are jointly held liable for the debts and losses of the firm.

    Legal Status

    Partnership firm has no distinct legal status separate from its partners.

    Transfer of Interest

    No partner can transfer its interest in the firm to anybody without the consent of other partners.

    Principal - Agent Relationship

    This relationship is based on mutual trust and faith among the partners in the interest of the firm. Business of the firm may be carried on by all the partners or any one of them acting for all. According to this, every partner is an agent when he is working on behalf of other partners and he is the principal when other partners act on his behalf.

    Advantages of Partnership Firm

    Easy Formation

    Registration is not compulsory in the case of Partnership firm. It can be formed without any legal formality and expenses. Thus they are simple and economical to form and operate.

    Larger Resources

    Due the more number of members the partnership firm has larger resources for the business operations as compared to sole proprietorship.

    Flexibility in Operation

    Due to the limited number of partners there is flexibility in the operations of business as the partners can amend any objectives or change any operations any time by mutual consent.

    Better Management

    Business of a partnership firm is very well managed by all the partners as they take interest in the daily affairs of business because of the ownership, profit and control.

    Sharing of Risk

    In partnership every partner bears the risks individually as it is easier compared to sole proprietorship.

    Protection of Interest

    In a partnership firm interest of every partner is protected against any fraud.

    Disadvantages of Partnership Firm

    Instability

    A partnership firm does not exist for an indefinite period of time. The death, insolvency or lunacy of a partner may lead to dissolution of the partnership firm.

    Unlimited Liability

    Liability of every partner in a partnership firm is unlimited as any of the partners may be called upon to pay all the debts even from its personal properties. A single wrong decision by one partner can lead other partners in heavy losses and liabilities.

    Lack of Harmony

    According partnership agreement every partner has equal rights. Some situations might occur in which one or the other partner will not agree on the same thing which will cause difference of opinion resulting mistrust and disharmony among the partners.

    Limited Capital

    Due to the restriction on the maximum number of members, a limited amount of capital can be raised.

    No Legal Status

    A partnership firm does not have a legal status like a Joint Stock Company.

    Transfer of ownership

    In a partnership firm it is not easy to transfer ownership. Consent of every partner is required in order to transfer ownership.
    Documentation

    Documents Required to Register a Partnership Firm

    The application for registration of Partnership Firm must contain the prescribed registration form for incorporation of a company, identity proof/address proof of Partners, certified a true copy of the Partnership deed entered into and proof of the principal place of business.

    1

    PAN Card

    A self-attested copy of PAN Card of all partners
    2

    Partners Address Proof

    Self- attested copy of Aadhar Card and Voter ID/ Passport/ Driving License of all partners
    3

    Business Address Proof

    Utility Bill (Electricity Bill) of the place of business
    4

    Rent Agreement

    Rent Agreement and NOC from the owner of the place of business, if rented
    Process

    Partnership Firm Registration Process

    At Vyapar Formations, we can help you register a partnership firm anywhere in India in less than seven working days. At the beginning of the engagement, an Advisor from Vyapar Formations will brief you about the process and provide you with a list of documents required for registration of partnership firm. You can submit the information and documents required through our mobile app or website. Once, the documents and information are verified, a partnership deed will be drafted and sent to the Partners. All the Partners must sign the document on stamp paper and upload a copy on the platform. Once, the signed partnership deed is available; it is registered with the concerned Registrar of Firms and Certificate of Registration of Partnership Firm is provided. In addition to delivering the Certificate of Registration of Partnership Firm, we can also help you open a Bank Current Account in the name of the partnership firm.


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