Partnership Firm registration starting from Rs.5,000/-
Partnership Firm Registration
For the establishment of a partnership firm registration, no heavy legal formalities are required. It is very easy to set up a partnership firm where two or more person can work for their mutual benefit.
In partnership firm, partners have unlimited liability, if the profit of the firm is not sufficient to settle their losses than they are liable from their personal assets. Partnership firm registration not required to file an annual return with the registrar on an annually basis.
All the terms and conditions of the partnership firm shall be mentioned in partnership deed where all the specific requirements are mentioned in partnership deed like profit sharing ratio of partners, their interest rates, terms and conditions for appointment and removal of partners. Partnership deep should be created on stamp paper as per the Indian Stamp Act, 1899.
Partnership firm registration does not have any separate legal entity. Partnership firm can’t be a member of any other company by its own name except section 8 company.
Maximum numbers of partners in partnership firm are 20 and in banking sector shall not exceed by 10. Partners of a partnership firm are freely decide the name of firm but which should not be identical, resemble with the name of a firm which is already registered.
Basic Features to Read before starting Partnership Firm:
1. Benefits of Partnership firm Registration
- Easy to form:-
Like sole proprietorships, partnership businesses can be formed easily without any compulsory legal formalities. It is not necessary to get the firm registered. A simple agreement or partnership deed, either oral or in writing, is sufficient to create a partnership. Note: Registration of the partnership is voluntary in most states. However, it would be best to check up the rules of your state to be sure.
- Availability of large resources:
Since two or more partners join hands to start a partnership business, it may be possible to pool together more resources as compared to a sole proprietorship. The partners can contribute more capital, more effort and more time for the business.
- Better decisions:
The partners are the owners of the business. Each of them has equal right to participate in the management of the business. In case of any conflict, they can sit together to solve the problem. Since all partners participate in the decision-making process, there is less scope for reckless and hasty decisions.
- Flexibility in operations:
A partnership firm is a flexible organization. At any time, the partners can decide to change the size or nature of the business or area of its operation. There is no need to follow any legal procedure. Only the consent of all the partners is required.
- Sharing risks:
In a partnership firm all the partners “share” the business risks. For example, if there are three partners and the firm makes a loss of Rs.12,000 in a particular period, then all partners may share it and the individual burden will be Rs.4000 only. Because of this, the partners may be encouraged to take up more risk and hence expand their business more.
- Protection of interest of each partner:
In a partnership firm, every partner has an equal say in decision making and the management of the business. If any decision goes against the interest of any partner, he can prevent the decision from being taken. In extreme cases, an unsatisfied partner may withdraw from the business and can dissolve it. In such extreme cases the “partnership deed” is required. In the absence of the partnership deed, no legal protection is given to the partners.
- Benefits of specialization:
Since all the partners are owners of the business, they can actively participate in every aspect of business as per their specialization, knowledge and experience. If you want to start a firm to provide legal consultancy to people, then one partner may deal with civil cases, one in criminal cases, and another in labour cases and so on as per the individual specialization. Similarly, two or more doctors of different specialization may start a clinic in partnership.
Requirements & Process for Partnership Registration
Partnership and proprietorship are the two most popular forms of business organization in India. The reason why these two forms of organizations are so popular is that they are relatively easy to set-up and the no. of statutory compliance required to be done by these forms of organizations is relatively less than the statutory compliance applicable to LLP’s and Companies. Step by step process to register a partnership firm in India. Step by step process to register a partnership firm in India are as follows-
Step 1- Choosing the Partnership Name
The partners are free to choose any name as they desire for their partnership firm subject to the following rules:-
- The names must not be too identical or similar to the name of another existing firm doing similar business so as to lead to confusion. The reason for this rule being that the reputation or goodwill of a firm may be injured, if a new firm could adopt an allied name.
- The name must not contain words like Crown, Emperor, Empress, Empire or words expressing or implying the sanction, approval or patronage of Government except when the State Government signifies its consent in writing to the use of such words as part of the firm name.
Step 2 – Create Partnership Deed
The document in which the respective rights and obligations of the members of a partnership are written is called the partnership deed.
A partnership deed agreement may be written or oral. However, practically oral agreement does not have any value for tax purposes and therefore the partnership agreement should be written. The following are the essential characteristics of a partnership deed:-
- Name and address of the firm as well as all the partners.
- Nature of business to be carried on.
- Date of commencement of business.
- Duration of partnership (whether for a fixed period/project).
- Capital contribution by each partner.
- Profit-sharing ratio among the partners.
The above are the minimum essentials which are required in all partnership deeds. The partners may also mention any additional clauses. Some of the examples of additional clauses which may be mentioned in the partnership deed are mentioned below:-
- Interest on Partner’s Capital, Partners’ Loan, and Interest, if any, to be charged on drawings.
- Salaries, Commissions etc. if any, payable to partners
- Method of preparing accounts and arrangement for audit
- Division of task and responsibility i.e. the duties, powers and obligations of all the partners.
Rules to be followed in case of retirement, death and admission of a partner. The partnership deed created by the partners should be on a stamp paper in accordance with the Indian Stamp Act and each partner should have a copy of the partnership deed. A copy of the partnership deed should also be filed with the Registrar of Firms in case the firm is being registered.
Step 3- How to Register the Partnership deed in India.
Partnerships in India are governed by the Indian Partnership Act, 1932. As per the Partnership Act, registration of partnership firms is optional and is entirely at the discretion of the partners. The partners may or may not register their partnership agreement. However, in case the partnership deed is not registered, they may not be able to enjoy the benefits which a registered partnership firm enjoys.
Registration of partnership firm may be done before starting the business or anytime during the continuance of partnership. However, where the firm intends to file a case in the court to enforce rights arising from the contract, the registration should be done before filing the case.
The procedure for registration of partnership firms in India is fairly simple. An application and the prescribed fees are required to be submitted to the Registrar of Firms of the state in which the firm is situated. The following documents are also required to be submitted along with the application:-
- Application for registration of partnership in Form No-1.
- Duly filled specimen of affidavit.
- Certified true copy of the partnership deed.
- Ownership proof of the principal place of business or rental/lease agreement thereof.
The application or statement must be signed by all the partners, or by their agents specially authorized in this behalf. When the registrar is satisfied with the points stated in the partnership deed, he shall record an entry of the statement in a register called the Register of Firms and issue a Certificate of Registration.
The register of firms maintained at the office of the registrar contains complete and up-to-date information about each registered firm. This register of firms is open to inspection by any person on payment of the prescribed fees.
Any person interested in viewing the details of any firm can request the Registrar of Firms for the same and on payment of the prescribed fees, a copy of all details of with firm registered with the registrar would be given to the applicant.
It should, however, be noted that registration with the registrar of firms is different from registration with the income tax department. 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.
- Advantages and disadvantages
- The partnership have no legal formalities.
- In a partnership firm, there is easy to increase the fund.
- The partnership has decision-making facility.
- Sharing risk.
- Profit and loss is shared by all the partners in their profit sharing ratio.
- In partnership firm partners have unlimited liability.
- There is minimum 2 partners required to incorporate a partnership firm registration.
- Partners are responsible for any loss incurred infirm.
- Without inform all partners a single partner cannot take any decision.
- Types of partners in partnership firm Registration
There are different types of partners in a partnership firm-
- Active partner
The active partner is the partner who acts in all the activities of the partnership firm and who run the business. They are full-fledged partners in the real sense of the term. When any active partner wants to retire the partnership he must give a public notice.
- Nominal partner
Nominal partners are those partners who not take part in any activities of management of the business. Either, he is not a part of sharing profit and loss. Nominal partner has an interest in the success of partnership firm. A nominal partner paid fees for his services.
- Dormant partner
It is also known as a sleeping partner. A dormant partner is that type of partner who put their capital in a firm but not takes any part in any activities of the firm. Dormant partner shares the profit and loss infirm and part of the decision making of the firm.
- Partner by estoppel
Any person who represents to other that he is a partner of the firm by words spoken, written or by his conduct then such partner is liable for all the debts of the firm, even though they do not put capital.
- Minor as partner
According to the contract act, a minor cannot be a partner. But if all the partners agree for make minor as a partner then he will a partner, but he must declare his decision by issue public notice. A minor partner can be a part of sharing profit but not liable to pay any losses in the firm. If a minor wants to retire he must issue a public notice.
- Secret partner
Secret partner is those partner who is a partner in actual but not in the eye of the public. A secret partner has unlimited liability. A secret partner has the right to contribute capital infirm. A secret partner also a part of sharing profit and loss. A secret partner does not take any part in the management of the firm.
- Dissolution of partnership firm
The minimum number of partners is 2 and the maximum number of the partner is 10 in the banking sector and 20 in another sector, there are certain conditions when the partnership firm dissolved
- When one of the partners dies.
- When all partners want to dissolve the firm.
- When a firm becomes insolvent.
- When any partner not able to pay his liability.
Following registered persons not required to file GSTR 1, 2 and 3 such as:
Goods and Services Tax (GST) is an indirect tax applicable on the supply of goods and services. It is a comprehensive, multistage, destination based tax. It has subsumed almost all the indirect taxes except a few state taxes. It is collected from point of consumption and not point of origin like previous taxes.
Documents attach in trademark application:-
A trademark can be registered by the Controller General of Patents Designs and Trademarks, Ministry of Commerce and Industry, Government of India under Trademark Act, 1999 to protect the identity of any goods and services.
Some basic information about Income tax
An income tax is a tax imposed on individuals or entities commonly known as taxpayers that varies with respective income or profits. Income tax generally is computed on taxable income which is calculated after various deductions. Taxation rates may vary by type or characteristics of the taxpayer.
Frequently asked questions on Partnership Firm
1.What is partnership?
Ans.According to Indian Partnership Act, 1932 partnership is the relation between partners who agreed to share profit and loss. The assets of partners may be taken for debts of the partnership.
2.How many partners required for partnership firm?
Ans. In partnership firm minimum 2 members is required and maximum 20 in business sector and 10 in banking case.
3.How partnership firm dissolve?
Ans.When any partner die a partnership firm dissolve. If a partner becomes insolvent a partnership firm dissolves.
4.Documents required for partnership firm?
Ans.Such important documents which are required at the time of register partnership firm-
- PAN card of firm.
- Address proof of firm.
- GST registration.
- Partnership Deed.Details of current account in a bank.
- Details of current account in a bank.
5.How partnership firm can convert into private limited company?
Ans. For conversion of partnership firm into private limited company some requirements are essential. Which are as follows-
- A partnership firm can register with more the 2 partners.
- For conversion into private limited there is minimum share capital shall be 1 lakh.
- There must be provision in partnership deed for conversion into private limited company.
- There must be written agreement between partners to convert into company.
6.What is the difference between partnership and limited liability partners?
Ans. A partnership firm is registered under partnership Act,1932, whereas a limited liability partnership is registered under limited liability partnership Act,2008. For partnership firm it is not mandatory to register but its preferred where as in LLP it is compulsory to register. Partnership can create by partnership agreement where LLP is create by law. Partnership have no separate legal entity whereas LLP have separate legal entity. In partnership firm partners are liable for action of other partners where as in LLP partners are not liable for action of other partners. Partnership have unlimited liability whereas LLP have limited liability of partners.
7.What is the meaning of partnership deed?
Ans.A partnership deed is a type of documents where all the condition, rule and regulation mention and where all the information regarding partners mention in partnership deed. It may be oral and written.
8.What is the limit of liability of partners?
Ans.In partnership firm the liability of partners is unlimited
9.What is the minimum and maximum capital requirement for partnership firm?
Ans.In case of partnership firm there is no minimum and maximum capital requirement
10.What are the features of partnership firm?
Ans.Some important features of partnership firm are-
- Two or more person
- Legal agreement
- Lawful business
- Unlimited liability
- Risk bearing
- Decision making
- Sharing profit and loss
11.How partnership firm form?
Ans.For creation partnership firm there must to at least 2 partners. A firm should register under Partnership Act,1932. There should be legal agreement between partners. The agreement specifies the terms and condition of doing business and sharing of profits and losses.
12.Is any minor can be a partner of partnership firm?
Ans. A minor cannot be a partner of partnership firm, but if all the partners of partnership firm agree to make a minor as partner, then he will be a partner. A minor first issue public notices for be a part of partner in partnership firm.
13.What are the conditions in partnership deed?
Ans.The terms and conditions in the partnership deed are as follows:
- The name and address of partners and partnership firm.
- The duration of partnership firm.
- The amount of capital contribute by each partner.
- Rate of interest of capital.
- Rate of interest of drawings.
- Profit and loss sharing ratio.
- If no profit sharing ration then the ratio is equal.
- Rights and duties of partners.
- Arbitration clause for settlement of disputes between the partners.
8.Limits of partners to invest in LLP
Ans. There is no limit of partners to invest in LLP.
ONE YEAR PACKAGE FOR PARTNERSHIP FIRM
Note for Partnership Registration
- Above prices is illustrative in nature and it will be very depends on the nature of business and number of transactions of business.
- Audit fees Charges will be applicable as the case may be in accordance of statutory law.
Basic Features to Read before starting private limited company
Private company is required to add the word “Private limited” or “Pvt. Ltd.” to end of its name. Private company should have at least two member and two directors. Private company have right to issue debentures to any number of persons.
Features of Public Limited Company
MCA provides the facility for incorporation of public limited company. For incorporation, firstly apply for name through RUN (Reserve Unique Name) on MCA portal. After availability of name from ROC we should file incorporation form i.e. Spice 32, INC 33(for eMOA), INC 34(for eAOA), .