Registration of Partnership Firm

1. Access to Business Opportunities: A registered partnership firm has credibility among clients, suppliers, and financial institutes. The increased credibility creates better access to highly valuable business opportunities, contracts, and collaboration that might not be available for the unregistered firm. It may be a show of professionalism and compliance which in turn attracts high-value clients as well as favourable terms from suppliers and lenders.
2. Operational Flexibility: The operational flexibility provided by a partnership firm to its partners makes it possible for them to respond quickly to the fluctuations of markets and business conditions. Being relatively less formalised in governance and regulatory requirements, a partnership firm has fewer formalities and reporting requirements compared to corporations. Here, partners can take collective decisions, respond quickly to the market trends, innovate new strategies, and perform diverse activities without any bureaucratic strangles.
3. Tax Advantages: Partnership firms have an advantage regarding tax treatment over other structures. The tax is at the partner level, which does not face double taxation, both at the entity level and at the individual level. Income is reported on personal income tax returns by the partners. In this manner, partners may benefit from lower tax rates and individual deductibles. Partnership firms can also become qualified to enjoy specific tax deductions and incentives, thus making it more tax efficient.

To register a partnership firm, key documents such as the partnership deed, identity proofs of partners, and address proof of the firm’s registered office are required. Here is a list of documents for the same:

1. Application for Registration of Partnership (Form 1)
2. Registered photocopy of Partnership Deed
3. Copy of an affidavit confirming all the details mentioned in the partnership deed and documents are correct
4. PAN card and address proof of the partners
5. Ownership documents or rental/lease agreement, for ascertaining the principal place of business of the firm.

The Indian Stamp Act, 1899 mandates stamp duty on the partnership deeds under Section 46. Even though the amount of stamp duty differs according to the states, there would still be the necessity of getting the deed notarised on non-judicial stamp paper with a value of more than ₹200 and this payment will be payable to the sub-registrar.

For Delhi, the minimum stamp duty payable upon a partnership deed is ₹200. In Mumbai, it is ₹500. Here if the capital of the firm exceeds ₹500, then a ₹500 stamp duty would be required. Similarly, in Kolkata, the deed should be printed on stamp paper worth ₹500. In Gujarat, according to Article 44 of Schedule I to the Gujarat Stamp Act, 1958, the stamp duty on a partnership deed is 1% of the partnership capital, up to a maximum of ₹10,000.

Note: The stamp duty rates vary in every state, therefore the specified rate must be ascertained for the local state and stamp paper is purchased accordingly. For more information connect with a legal expert today.

Steps to Open a Bank Account

1. Step 1: Choose a bank where you want to open your firm's account
2. Step 2: Visit the bank branch or access its website for further instructions
3. Step 3: Select a banking product that best suits the needs of your partnership firm
4. Step 4: Provide the necessary information and submit relevant documents like the partnership deed, PAN card, and partners' identification
5. Step 5: Review and agree to the bank’s terms and conditions to finalise the account opening process.

GST registration is mandatory if the firm has a turnover of more than ₹40 lakhs in a year, in the case of goods, and more than ₹20 lakhs in the case of services. Apply on the GST website for GST registration.

Fill in the application with the PAN of the firm, the address, and the nature of business of the firm. Send all the documents to be submitted -the deed of partnership -PAN of the firm and partners -proof of address. Upon submission, the application is verified, and once approved, a GSTIN is issued to that firm. The firm can then collect GST, file GST returns, and adhere to tax regulations.

Is GST Registration Mandatory?

Under the GST Act, a firm at partnership has to be registered under GST if the turnover of supply of goods exceeds ₹40 lakhs or that of supply of services exceeds ₹20 lakhs in a financial year. Firms will also have to make themselves liable for registration under GST for interstate supplies of goods and e-commerce supplies and supplies taxable services too, despite the threshold limit. Failure to register within the permissible limit results in penalties, thus exposing them to non-compliance with tax legislations. Even some of those companies with smaller turnovers may opt to register just to enjoy input tax credits and enhance business credibility.

How to Apply for GST Registration?

Step 1: Reach out to us

Book a slot with our GST experts and clear all your doubts.

Step 2: Fill Business Details

Share the required documents and fill in all the necessary business details. Such as business name, SEZ unit, Principal place of business, additional places, mobile number, email address, state, PAN card details to start the process of registration .

Step 3: Filing GST Registration

Our team will submit your GST registration application on the online portal, for OTP verification after successful submission of which you would have received one, respectively.

Step 4: Getting Your GSTIN

Once verified that your team has done so, you are allowed to check the status of your application with the reference number they give you-most commonly known as a temporary reference number, application reference number (ARN). Once this process is finalised, the GST registration certificate will be available on the GST website.

It is imperative that one understands the process and what forms to submit with regard to the filing of annual returns and financial statements for a partnership firm.

ITR-5 is the specific form that is to be filed in respect of a partnership firm. This form is for the firm as an entity, and it is not for any individual partners. It is necessary to distinguish between the ITR-5 and ITR-3 forms, because ITR-3 is for individuals who can be partners and not for firms.

Filing can easily be done online, by first accessing the portal of the income tax department in the same way as one would file his income tax return. It ensures that the financial statements and all information related to tax are submitted correctly and efficiently.

Importance of Annual Compliance

Strengthening Company's Reputation: Consistency in the filing procedure and financial reporting is a crucial aspect of an organisation's integrity, as well as its professionalism. The requirement of compliance builds up the reputation of the company and sustains it in the market.

Attracts Investors: Companies which have history in the timely and accurate compliance attract investors much more than otherwise. The investors also like firms showing financial stability and regulatory adherence since this reduces the risk of financial mismanagement.

Maintaining Active Status and No Penalties: The default status with regard to a company occurs when it fails to meet its annual compliance requirements. This not only puts at risk its active status but also brings in great fines and penalties. Filing and compliance regularly help maintain the company's active status and avoid such financial drawbacks.

Penalties for Non-Compliance

1. Fines: Fine is part of the typical fines to be used in case there was no maintenance of the stipulated standards of compliance. These fines can accrue over time and increase to enormous figures impacting on the general financial status of the business
2. Prison Terms: Those individuals who are directly in charge and failed to adhere to may face imprisonment, in most instances, where such a failure to comply is characterised by outright criminality or serious breaches of law
3. Reputation Loss: Non-compliance may seriously damage the reputation of a firm, where clients, partners, and investors lose faith and confidence in the business
4. Closure of Business: Non-compliance that has been persistent may lead to business closure especially when such actions result in law enforcement or revocation of business licences
5. Risk to Workers Safety: Non-compliance with safety standards may expose workers to risk, with chances of persecution through the courts and potential injury from the action taken to enforce compliance
6. Employee Compensation: Where non-compliance with labour laws results in financial compensation claims, which are generally paid out, if not settled
7. Discrimination Employment Practice: In this case, a company opens its business operational integrity to lawsuits and fines for not complying with the legislation on discrimination employment laws.

The application should be made accompanied by the payment of the required fee payable in accordance with the laws of the state. The details upon submission will be accessed by the Registrar of Firms to issue the Certificate of Registration.

Note: The requirements differ from state to state and that one seeking these services may refer to a lawyer or to the local Registrar of Firms for the information needed.

Under the Indian Partnership Act of 1932, a firm is not a separate legal entity from its partners. Thus, the registration certificate assumes an importance which it would otherwise not have had. In itself, the certificate confers legal recognition on the firm-an opportunity for the firm to carry on business and derive benefits through law that a mere unregistered entity cannot. It also means that the information about the firm is going to be in the public domain with all the implications that such disclosure carries-the implication of transparency and accountability in business operations.

1. Nature of Business : Indicates the nature of business carried on by the partnership.
2. Profit Sharing Ratio: States who gets how much of profit or loss.
3. Interest on Capital and Drawings: Notes the rate at which interest is charged on partners' capitals with respect to their drawings.
4. Loans and Drawings: Records loans advanced by and to partners as well as their drawings.
5. Power of Borrowing of Partner: Determine what powers are bestowed on the partners pertaining to borrowing funds for and on behalf of the partnership
6. Salary and Remuneration: Determine whether any salary and remuneration is offered to the partners or not
7. Capital of the Partner: Determine the contribution that each of the partners make in the form of their capital
8. Limitation on Rights: Determine if there is any sort of limitation on the rights of the partners as stated in the deed.