Partnership Firm Registration: All You Need To Know By Dhivya Krishna - December 12, 2019 Last Updated at: Jan 22, 2021 3778 In a recent judgment, the Supreme Court has distinguished between the retirement of a partner and the dissolution of a partnership firm. The Court has said that when there are only two partners in a partnership firm, the retirement of one partner will amount to the dissolution of the firm. Introduction Starting a business as a one-man army is no play, but having a team or someone to help you grow through the thick and thin of business stuff is a great deal, making partnerships the most preferred form of business establishment. A partnership firm is defined as a form of business which is set up by two or more people who agree on sharing their business profits and losses in the decided ratio, whatsoever be the case. The limited liability partnership (LLP) is the preferred form of business to date. While LLP was started in 2010, the Partnership Act dates back to 1932, giving evidence that the partnership businesses are the most preferred and trusted ones. Having a partner is not limited to anyone. They can be friends, family, colleagues or just some strangers with common motives, interests, and trust. The major benefit of a partnership firm is its easy compliance and easy formation. Check out the blog: How to register Partnership firm? Types of Partnership Firms To start a business in the form of business, the only condition is to form and finalize a partnership deed under the Indian Partnership Act, 1932. Click here to know about Partnership Deed Format. There are two types of Partnership Firms: Unregistered Partnership Firm Registered Partnership Firm It is neither mandatory to register the firm to start a business nor is there any penalty for no-registration. It is the sole choice of the partners and business owners. The firm can be registered once it is formed. The only drawback of the unregistered firm is that it does enjoy the benefits and rights under Section 69 of the Partnership Act. However, it is always recommended to register the firm sooner or later to legalize it and enjoy the various rights so offered. Get free legal advice now What is a Partnership Deed and how is it formed? A Partnership Deed is a type of contract that lays down and mentions all rights, duties and other formalities regarding the partners and the firm. The details that you should mention in the Partnership Deed are as follows: Name of the Partners. Name and type of business along with the capital contributions made by each partner. The ratio of profit and loss among the partners. Rights and Duties of each partner. The processes that we should follow and the rules for working of the firm. Partners themselves decide if any other information includes. Registration of a Partnership Firm and the Documents Required The Registration of the Partnership Firm is quite easy and approachable process. Its registration takes place under Section 58 of the Indian Partnership Act. The process involves the submission of the application forms and fees to the Registrar of Firms of the particular state, depending on the location of the firm. All the partners of the firm must sign the application and provide their consent. Once all the provisions under Section 58 are confirmed by the Registrar of Firms and they are satisfied, the firm is recorded in the entry of statements and further, the registration certificate is finally issued in the name of the firm. While the Registrar of Firms and the Income Tax Department are two different terms, the firm must apply for the registration in both. Along with this, it is also mandatory for the firm to have their PAN card. Such that the further bank account opening, processes, and transactions are made with the same. Along with the Application Form, you will have to submit various documents such as: Copy of the Partnership Deed so formed. Registration form. Documents for the address and identity proof of the partners must include: PAN Card Driving License Aadhar Card Voter ID Passport Proof of the property, if rented or owned. Receipt of electricity or water bill. Every company, firm or business has two sides of the coin which are their advantages and disadvantages, and so is the case with Partnership Firms. Advantages of Partnership Firm The incorporation and compliance are very easy, making it possible for everyone to set up their business as a Partnership Firm. These are far better than LLP or other firms as they do not involve any filing of returns or taxes, neither monthly nor annually. This makes all the financial statements of the firm private. Disadvantages of Partnership Firm The partnership firms are limited to certain levels. If the investors, venture capitalists, and others approach, then the firms hold back. Their functioning is not as transparent as other firms and businesses registered in other ways. Conclusion As such, having a partnership firm is a good way to set up the business and choosing the type of firm depending on what the individuals and partners expect from their business and the firm.