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
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.
Characteristics of Partnership Firm
Benefits of Forming Partnership Firm
Most frequent questions and answers
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
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.
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.
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.
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.
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.