partnership-firm-registration

THINGS TO KNOW BEFORE YOU REGISTER A - PARTNERSHIP FIRM

The partnership is the simplest form of business for more than one owner. You can start functioning as a partnership firm within the same day. Get your partnership deed same day, apply for a PAN and open a Bank Account. We will help you at all stages

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It is basically a relation between two or more persons who join hands to form a business organization with the objective of earning profit. The persons who join hands are individually known as ‘Partner’ and collectively a ‘Firm’. To expand business, more capital and better managerial skills are required. A proprietor may find himself unable to fulfill them
Actually, when such group of persons decides to start a business, they should decide
• the amount of capital to be contributed by each one of the partner
• who will manage the business
• how will the profits and losses be shared
Thus, there must be some agreement between the partners before they actually start the business. This agreement is termed as ‘Partnership Deed’. The agreement must state the ratio in which profits and liabilities are to be shared.

Therefore, it is always better to insist on a written agreement among partners in order to avoid future controversies. A partnership firm is governed by the provisions of the Indian Partnership Act, 1932. Section 4 of the Indian Partnership Act, 1932, defines partnership as “a relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

More than one Person Involved

There should be at least 2 persons while incorporating Partnership Firm.
Profit and Loss are Shared

The profits and losses of the firm are shared between all the partners in agreed Profit Sharing Ratio. The Ratios should be same as mentioned in Partnership Deed.
Partnership Deed

Partnership is formed by an agreement-oral or written-among the partners.
Existence of Lawful Business

Partnership is formed to carry on some lawful business and share its profits or losses. For example, if the purpose is to carry some charitable works, then it is not regarded as partnership.
Unlimited Liability

All the partners have unlimited liability for all the debts and losses of the firm.
Restrictions on Transfer of Share

No partner can transfer his/her share to any outside person without seeking the consent of all other partners.

Benefits Of Forming Partnership Firm

Easy Formation

More Number of Partners implies Larger Resources

Flexible to Operate

Better Management

Sharing the Risks

Increased ability to raise funds

List Of Documents Required For Partnership Firm Registration

1. For Formation of Partnership Deed:

1. Commencement of Partnership Firm
2. Partners’ Name, Address, Father’s Name and PAN (if available)
3. Name, Address and Nature of Business
4. Capital Contribution
5. Profit sharing Ratio
6. Duration (if firm is made for a fixed period of time)
7. Salaries of the partners, Interest on capital and Interest on Loans/ Drawings
2. For Registration of Partnership Firm:

1. Application for Registration of Partnership Firm in Form No. 1
2. Duly Filled specimen of Affidavit
3. Partnership Deed (on the Stamp Paper) – Original and Signed
4. Copy of PAN card of all Partners with address proof
5. The date when each partner joined the firm
6. Address Proof of Place of Business – Ration Card/Voter ID/Driving License
7. Registered Power of Attorney of the premises where Firm is to be registered
8. If rented, Rent Deed, Rent Receipt
9. NOC from Landlord
Note: Registration is not compulsory. It can be done before or during the course of business.

Applicability

Partnership Firm

cannot be constituted by a single person. It requires two or more persons to come together to form an association.
The Partnership comes into force after its basic requirement

Partnership Deed. The agreement should be prepared and fulfill the basic requirement of being a contract as per Contract Act.
Therefore, the person who is eligible to enter into a contract can form a Partnership Firm.
As per Contract Act, following persons cannot enter into an agreement:

1. minor
2. convicts
3. person with unsound mind
4. insolvent
Conclusion:

Any two or more persons can form Partnership Firm if they are eligible to enter into contract.

FAQ

Most Frequent Questions And Answers

HOW MUCH REMUNERATION OR INTEREST CAN BE PAID TO A PARTNER?

As per Income Tax Act, interest payable to partners shall be in accordance with the terms of the partnership deed; however, it shall not exceed 12% per annum.

Remuneration payable to partners shall be in accordance with the terms of the partnership deed, however, it shall not exceed the following limit:

On first Rs. 3 Lakhs of book profit or in case of loss – Rs. 1,50,000 or 90% of book profit, whichever is more
On the balance of the book profit – 60% of book profit

I AM NOT A CITIZEN OF INDIA. CAN I BE A PARTNER IN AN INDIAN FIRM?

The Partnership Act does not prohibit a non-citizen from joining an Indian partnership firm, subject to necessary clearances and permissions from satisfactory authorities in this regard.

IS A DEED OF PARTNERSHIP NECESSARY?

This agreement may be oral or written. But, due to legal requirements, an oral partnership deed is not practicable. Therefore, the deed or agreement should be in writing.

CAN A MINOR ADMITTED TO THE BENEFITS OF PARTNERSHIP, BECOME A PARTNER ON ATTAINING MAJORITY?

A minor admitted to the partnership firm, has the option to become a partner within six months of attaining majority. He has to give a public notice stating his acceptance or rejection of partnership. In the absence of a notice, it is considered that he has become a partner of the firm.

CAN A FIRM BECOME A PARTNER IN ANOTHER FIRM?

A partnership firm cannot become a partner of another firm because it is not a legal person. However, the partners may be partners in another firm in their individual capacity.

WHAT IS DISSOLUTION OF PARTNERSHIP BY CONSENT?

Partnership can be dissolved according to the contract between the partners. The partnership deed should contain the provision of dissolution. The consent of all the partners is not necessary.