Thinking about registering a partnership firm? We’ve got you covered in this all-inclusive guide which outlines everything from the types of partnerships in existence to the documents required for registration.
Starting a firm as a one-man army is no easy task, but having a team or someone to assist you to grow through the ups and downs of business is a huge plus, making partnerships the most popular business structure.
A partnership firm is a type of business formed by two or more persons who agree to share their business profits and losses in a predetermined ratio, regardless of the circumstances.
To this day, the limited liability partnership (LLP) model is the most popular type of partnership. While the Limited Liability Partnership (LLP) founded legal recognition quite recently, the Partnership Act was passed in 1932, demonstrating that partnership enterprises have been desired and trusted for a very long time now.
No one is excluded from becoming a partner. Partners could be friends, relatives, coworkers, or even complete strangers who share common goals, interests, and trust.
In a recent judgment, the Supreme Court distinguished between the retirement of a partner and the dissolution of a partnership company. The Court has said that when there are only two partners in a partnership company, the retirement of one partner will amount to the dissolution of the company.
Types of Partnership Firms
To start a business in the form of a partnership, the only condition is to form and finalize a partnership deed under the Indian Partnership Act, 1932.
There are two types of Partnership Firms:
- Unregistered partnership firms and,
- Registered partnership firms
There is no requirement to register a company in order to start a business, and there is also no penalty for failing to do so. It is entirely up to the partners and business owners to make this decision. Even once the company is constituted, it can be registered. An unregistered firm’s only disadvantage is that it is not entitled to the benefits and rights provided 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 offered under the Act.
What is a Partnership Deed and How is it Formed?
A Partnership Deed is a type of contract that lays down and mentions all the rights, duties and other formalities regarding the partners and the company.
The details that you should mention in the firm registration online 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 sharing among the partners.
- Rights and duties of each partner.
- The processes to be followed and the rules for the operation of the firm.
Partners themselves can also decide if any other information or clause needs to be included.
Partnership Company Formation
The registration of a partnership firm is a simple and straightforward procedure. The Indian Partnership Act, Section 58, governs its registration. Depending on where the firm is located, the process entails submitting application paperwork and fees to the Registrar of Firms in that particular state. All the partners of the firm must also sign the application and provide their consent.
The firm is registered in the entry of statements, and the registration certificate is finally issued in the name of the firm after the Registrar of Firms has cross-verified the application for registration as per the provisions under Section 58 and found it to be complied with.
As the Registrar of Firms and the Income Tax Filing Department are two different bodies, the firm must apply for registration in both. Along with this, it is also mandatory for the firm to have their PAN card. Such that further opening of bank accounts, complex financial processes, and transactions are made in a timely manner.
Documents Required for Partnership Formation
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 either:
- Proof of the firm property, if rented or owned.
- Receipt of electricity or water bill.
Advantages and Disadvantages of a Partnership Business
Every company, organisation, or proprietorship has two sides to its coin in terms of benefits and drawbacks, and partnership company are no exception.
The incorporation and compliance processes are simple, making it possible for anybody to start a Partnership company. These are considerably superior to LLPs and other firms because they do not require the filing of monthly or annual returns or taxes. This maintains the company’s financial statements confidential.
However, partnership firms have restrictions to a certain size. In fact, investors, venture capitalists, and others do not readily approach firms and remain quite cautious. This is because a partnership’s operations are not as transparent as those of other companies and corporations that are registered in various other ways.
As a result, forming a partnership company is a fantastic approach to start a business. Registration of such firms on the other hand must be on what the individuals and partners want from their business and firm. All in all, it is safe to say that the partnership model does work wonders and registration of the same is advisable. Get in touch with our experts to learn more about hassle-free partnership company registration!
- What Are the Key Features of Partnership Deed?
- Pan Card for Partnership Firm
- Different Types of Partnership Firm