Partnership Firm Registration

Through Partnership Firm, two or more individuals can enhance their business activity to follow a strategy in eye of creative business. Partners are bound to carry on the business of the firm to greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner, his heir or legal representative. A Partnership is one of the most important forms of a business organization, where two or more people come together to form a business and divide the profits thereof in an agreed ratio. A Partnership is easy to form, and the compliance is minimal as compared to companies.
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Process of Registration of Partnership Firm

The stepwise Process to START A PARTNERSHIP firm includes:-


1. Drafting Partnership Deed-

Partnership deed is an agreement between the partners in which rights, duties, profits shares and other obligations of each partner is mentioned. We advise to write partnership deed to avoid any conflicts in the future.

 

Following details & documents are required to draft a partnership deed: 
 
  1. PAN, Aadhar (ID and Address proof) and Passport size Photo of all the Working partners;

  2. Business Name, Office Address and business commencement date of the proposed firm;

  3. Nature of business and detailed working area of Business of the Firm;

  4. Initial Capital to be contributed by each partner;

  5. Profit/loss sharing ratio among the partners;

Above details are essentials for all Partnership deeds, the partner may mention some additional clause as per their requirements, some examples are:

  • Salaries, commissions or any other amount to be payable to partners;

  • Interest on Partner’s Capital, Loan and Interest, if any to be charged on drawings;

  • Duties and obligations & Rights of each partner, including additional rights to be enjoyed by the active partners;

  • Any rules (processes to be followed in case of retirement, death, admission of a partner or dissolution of firm etc.) as partners may decide by mutual discussion.

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2. Registration of Partnership Deed-


A partnership firm can be registered under Section 58 of the Indian Partnership Act, 1932 at any time during continuation of business. There is no time limit to register the Partnership Firm in the act. Registration of partnership firm is optional and at the discretion of the partners. The registration of a partnership firm is done through the Registrar of Firm in the area, at which the partnership firm is situated. After satisfaction by Registrar of Firm, he will made a record of entry of the firm in the Register of Firms and Certificate of Registration is issued.
 
It is always advisable to register the firm since a registered firms enjoy special rights which aren’t available to the unregistered firms like StartUp India benefits.
Following documents are required to register a partnership firm: 
  1. Application for registration of partnership (Form 1);

  2. Duly filled Specimen of Affidavit;

  3. Certified two original copy of Partnership Deed;

  4. Self-attested copy of PAN and Aadhar (or other address proof) of all Partners;

  5. Proof of principal place of business (ownership documents like: electricity bill, MTNL bill etc. and rental/lease agreement).

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3. Registration of Firm with Income Tax Department-
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It is mandatory for all firms to apply for Registration with the Income Tax Department and have a PAN Card. After obtaining a PAN Card, the Partnership Firm would be required to open a Current Account in the name of the Partnership Firm and operate all its operations through this Bank Account. After completion of deed, Partner can start the business with the Firm after obtaining PAN and a current Account without and/or before registration of Firm with Registrar of Firm.

 Advantages of Partnership Firm :

  • Existence of an Agency Relation- Each partner is a principal in himself who can act in his own right. Further, he can also act on behalf of other partners by acting as their agent.

  • Combined Management- Partners running the business need to take consent of other partners for making the requisite decisions.

  • Duration of the Partnership Firm- The partnership Firm may continue as long as the partners wish to do so. However, as per law, the partnership can come to an end if any of the partners dies, retires or becomes insolvent. But, the remaining partners can continue doing business under the same name after sorting out the due share of the outgoing partner.

  • Minimal requirement of Compliances- One of the main advantages of a Partnership Firm is that there are very minimal requirements in terms of compliance. A registered/unregistered Partnership Firms are only required to file their income tax return in case of non-audit. Audit of Firm done only when the turnover are exceeds the prescribed maximum limit to Audit mentioned in the Income Tax Act.

 

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 Disadvantage of Partnership Firms :

  • Unlimited Liability of the Partners – Each Partner is personally liable for all losses arising in the course of business. It means, their personal assets can be used to pay off the outstanding debts of the partnership firm.

  • Limitation on the transferability of share- A partner cannot transfer his share to any other person. He may however do so on the consent of other partners. The interest of a Partner in a Partnership firm is not easily transferrable, and the ownership structure does not allow for investment from Angel Investors, Venture Capitalists or Private Equity Firms.

 

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Why ASK Commercial Solutions?

ASK Commercial Solutions provide complete business solutions for smooth running your Firm, we also provide the services of-

 

  • Drafting of Partnership Deed and Registered thereof.

  • Advise on admission and retirement of partners.

  • Make Income Tax Registration and Filing ITR as well as Audit, if applicable.

  • Provide best ideas to create more activities of business as well as saving/ planning of tax.

  • Maintenance of accounting record and filing of forms/ returns on behalf of clients.

  • Execute proceeding according to law for winding up firm.

  • Advise on partnership disputes such as right of partners to have business wound up after dissolution, mode of settlement of accounts between partners, sale of goodwill after dissolution etc.