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Partnership Firm Registration

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  • Overview
  • Regulation
  • Eligibility
  • Benefits
  • Types
  • Requirement
  • Documents
  • Process
  • Validity
  • Renewal
  • Online Renewal Process
  • How Can ApkaTax Assist You
  • Fees
  • FAQs

What is Partnership Firm Registration?

A Partnership Firm in India is a business structure that offers low risk and improved legal stability. Formed by two or more individuals through a partnership deed, this agreement outlines the business’s legal aspects and the profit distribution among partners. Such entities are straightforward to establish due to minimal compliance requirements. In India, these firms are regulated by the Indian Partnership Act, 1932.

Partnership firms are vital forms of business organizations and are widely popular in India. To establish a partnership firm, a minimum of two individuals is required. In this business structure, multiple people collaborate to form a business and share the profits based on a pre-agreed ratio. The scope of partnership business covers various trades, occupations, and professions. The Indian Partnership Act, 1932 plays a crucial role in governing and regulating partnership firms in India. The individuals who join together to establish the partnership firm are referred to as partners. The formation of the partnership firm is based on a contract known as the partnership deed, which governs the relationship among the partners and between the partners and the Partnership Firm Registration.

 

What is Partnership Firm Registration Regulation?

The core foundation for comprehending the legal aspects concerning Partnership Firm Registration primarily stems from the Indian Partnership Act of 1932. This act stands as one of the early precedents in Indian statutory history, examining crucial elements related to partnerships in the country. Nevertheless, it is a remnant of our colonial past, which is undeniably not self-originated. The essential concept of partnership as a mutual bond built on trust remains uncodified.

 

What are the Eligibility of Partnership Firm Registration?

Partnership firms are integral to the landscape of business organizations and widely adopted in India. To establish a partnership firm, a minimum of two individuals is required. Such firms come into existence when two or more people collaborate to create a business and distribute its profits among themselves based on an agreed-upon ratio. Partnership businesses encompass various trades, occupations, and professions.

In India, partnership firms are governed and regulated by the Indian Partnership Act of 1932. The individuals who join together to form the partnership firm are referred to as partners. The partnership firm is established through a contract known as the partnership deed, which governs the relationships among the partners and between the partners and the firm itself.

 

What are the Benefits of Partnership Firm Registration?

Benefits of Partnership Firms Registration are as follows:

The partnership firm is a highly favored business structure in India due to its numerous benefits, which include the following:

  1. Easy Incorporation: Setting up a partnership firm is a smooth and straightforward process compared to other business forms. The incorporation starts with creating a partnership deed, the primary document required for this type of firm.
  2. Minimal Compliances Partnership: firms have fewer compliance requirements compared to structures like LLP (Limited Liability Partnership). The absence of directors eliminates the need for Digital Signature Certificates (DSC) or Director Identification Numbers. Reconstituting the partnership firm through the partnership deed is also simpler. Moreover, operational compliances are minimal, and dissolving the firm involves fewer formalities.
  3. Swift Decision Making: The absence of a complex management structure allows partnership firms to make quick decisions. As most decisions rest with the serving partners, there is no need to appoint additional officials, leading to efficient decision-making processes.
  4. Flexibility in Profit and Loss Sharing: Partners have the liberty to decide the profit and loss-sharing ratios based on mutually agreed terms. This ensures clarity and stability among the partners, and individual partners are not burdened with the entire loss. Associates can help compensate for losses as per the agreed-upon terms.

Overall, the partnership firm proves to be a practical and advantageous business structure, offering ease of incorporation, reduced compliances, quick decision-making, and flexible profit and loss sharing for its partners.

 

What is Types of Partnership Firm Registration?

Types of Partnership Firms are as follows:

  1. General Partnership: In a General Partnership firm, two or more individuals come together as co-owners to run a business. Their ownership and profit sharing are determined by a partnership agreement signed before commencing the partnership. Profits are considered individual income, and the firm is not taxed separately. Partners are individually liable for business debts and legal obligations, making it a flexible but risky venture with shared responsibilities.
  2. Limited Partnership: Limited Partnership is a more organized model than General Partnership. It requires at least one general partner responsible for managing the business and bearing liabilities. Limited partners provide funding but are not involved in day-to-day operations or decision-making. They enjoy profit-sharing but have limited liability, protecting them from the actions of general partners.
  3. Limited Liability Partnership (LLP): An LLP combines features of General and Limited Partnership. All partners can actively manage the business but are only liable for their actions. They are shielded from taking responsibility for other partners’ actions, limiting personal risk. This structure is popular among professionals like doctors, lawyers, and accountants who pool resources and expertise to share profits without high individual risk.
  4. LLC Partnership: An LLC Partnership is a business entity where owners (known as members) are protected from personal liability for the firm’s debts. It functions as a hybrid model, incorporating aspects of a corporation and a partnership or sole proprietorship. The rules and regulations for LLCs vary across countries, but the key feature is that individual partners are not personally liable for the company’s debts or legal obligations. LLCs are not taxed directly; instead, partners pay taxes on their income share.

Each type of partnership firm offers distinct advantages and caters to different needs, making them valuable choices for entrepreneurs and professionals alike.

 

What are the Requirement of Partnership Firm Registration?

Requirements for Partnership Firm Registration are as follows:

  1. Minimum Two Persons: A Partnership Firm must have at least two partners, and the maximum allowed is 20 partners (10 in banking business). All partners should be eligible to contract, i.e., of legal age according to the law and not barred from entering a partnership.
  2. No Foreign Direct Investment (FDI) Allowed: Foreign investment in a Partnership Firm is not permitted. Only Indian citizens can become partners and initiate the partnership firm.
  3. No Minimum Capital Requirement: There is no prescribed minimum capital; the capital should be based on the business requirements. The Stamp Duty on the partnership deed depends on the firm’s capital. Firms with a capital of up to two thousand rupees are not eligible to claim a set-off or enforce a right arising from the partnership.
  4. Unique Name: The firm’s name must be unique and not identical or similar to any existing registered or applied trademark.

Additional Details Required in the Partnership Deed are as follows:

General Details:

  • Name and address (partners and of the partnership firm).
  • Nature of the business.
  • Date of starting the business.
  • Capital by each partner in the partnership firm registration).
  • Profit/loss sharing ratio among the partners.

Specific Details:

In addition to the general details, the partnership deed may include specific clauses to avoid conflicts in the future. These clauses may cover:

  • Interest on capital invested, partner drawings, or loans provided by partners to the firm.
  • Salaries, commissions, or any other payable amounts to partners.
  • Rights of each partner, including additional rights for active partners.
  • Duties and obligations of all partners.
  • Procedures to be followed in case of retirement, death of a partner, or firm dissolution.
  • Other clauses as mutually agreed upon by the partners through discussion.

By meeting these requirements and including essential details in the partnership deed, a Partnership Firm can be legally established.

 

What are the Documents Required in Partnership Firm Registration?

To register a Partnership Firm, the applicants must provide certain essential documents. The list includes:

  1. Application form (Form 1) duly signed by all the partners involved in the partnership.
  2. A verified copy of the Partnership Deed, which should bear the seal and signature of the authorized authority.
  3. An affidavit affirming the accuracy and legitimacy of the information contained in the Partnership Deed and other supporting documents.
  4. The Permanent Account Number (PAN) and proof of residency for all the partners.
  5. Evidence of the business location, such as a lease or rent agreement, to establish the physical address of the firm.

In addition to the above, each partner must furnish the following documents:

  • Two recent photographs.
  • A copy of their PAN Card for tax identification purposes.
  • A valid Identity Proof to establish their identity, such as a passport, driver’s license, or Aadhaar card.
  • The most up-to-date Address Proof to confirm their current residential address.

All of these mandatory documents should be carefully compiled and submitted to the Registrar of Firms (ROFs) as part of the partnership firm registration process. By providing accurate and complete documentation, the partnership firm can proceed with the registration and legally establish its presence.

 

What is the Process of Registration of Partnership Firm?

The process of a partnership firm registration is a s follows:

The Comprehensive Process of Partnership Firm Registration in India:

Step 1: Submitting the Registration Application To legalize a partnership firm in India, you need to submit an application form to the Registrar of Firms (ROFs) of the relevant state along with the required fees. The application form should bear the signatures of the prospective partners. It’s common to send the application via registered post. Before dispatching the application, refer to the checklist provided below to ensure all mandatory details are included:

  • Proposed Firm’s name
  • Principal place of business
  • Address of any ancillary unit (if applicable)
  • Date of joining for each partner
  • Names and address of each partner
  • Year of establishment of the Firm

Step 2: Selecting an Appropriate Firm Name When choosing a name for the partnership firm, consider the following points:

  • The name should not conflict with any existing firms or third parties.
  • It should be unique and distinguishable.
  • Ensure the name complies with relevant Acts, such as the Trademark Act and Emblem and Name Act, 1950.

Step 3: Receiving the Certificate of Registration Upon verifying the submitted form and documents, the Registrar will grant the registration certificate and officially register the proposed firm in the Register of Firms. This register contains all pertinent details of the registered firm and is accessible to business owners (i.e., partners) upon payment of the standard fees.

 

What is Partnership Firm Registration Validity?

As per the India Partnership Act of 1932, there is no specific deadline for registering a firm. The firm can be registered on the date of its incorporation or any date thereafter. The Act allows flexibility in the registration process, accommodating registration at any suitable time after the firm’s establishment. However, it is essential to ensure that all the necessary fees and fines associated with the registration are duly paid to complete the process in compliance with the law.

 

What is Partnership Firm Registration Renewal?

Renewal Criteria for Partnership Firm are as follows:

To qualify for renewal, the partnership firm must fulfill the subsequent criteria:

  • The partnership firm must be registered.
  • The registration of the partnership firm must be active and not expired.
  • The partnership firm must adhere to all essential regulatory requirements.

 

What is Online Renewal Process for Partnership Firm?

Renewing your partnership firm online involves a series of carefully followed steps. Let’s explore these steps in detail:

Step-by-Step Partnership Firm Renewal Process:

  • Step 1: Gather Essential Information Before commencing the online renewal process, ensure you have all the necessary information and documents pertaining to your partnership firm. This includes the partnership deed, proof of partnership existence, address and identity proofs, PAN card details, and relevant bank account information.
  • Step 2: Register on the Online Portal To proceed with the online renewal, create an account on the designated online portal provided by the appropriate government authority. Provide personal and firm-related details during the registration process.
  • Step 3: Complete the Renewal Application Once registered on the online portal, access the “Renew Partnership Firm Online” application form. Accurately fill in all the required details, such as the firm’s name, partners’ information, business address, and contact details.
  • Step 4: Upload Supporting Documents Attach all the necessary documents to support your renewal application. Ensure that the scanned copies are clear, legible, and in the specified file formats accepted on the online portal.
  • Step 5: Make Online Payment Pay the prescribed renewal fees using the available online payment methods. The portal will provide information on the applicable fees and accepted modes of payment.
  • Step 6: Submit the Application Thoroughly review all the entered information and uploaded documents. Once confident in the accuracy of the details, electronically submit the “Renew Partnership Firm Online” application through the portal. Make sure to retain a copy of the acknowledgment or reference number for future reference.

By following these steps, you can successfully renew your partnership firm online and ensure its continued compliance with the regulatory requirements.

 

How Can ApkaTax Assist You?

End-to-End Assistance 

We provide thorough assistance and provide comprehensive assistance for getting your Partnership Firm Registration. 

Expert Legal Guidance

ApkaTax offers comprehensive support for the Partnership Firm Registration application process, including legal assistance based on the specific priorities of our clients.

Best in Class client Support 

Our dedicated support team ensures that our clients stay informed about the latest guidelines and updates regarding Partnership Firm Registration requirements and periodic inspections.

 

What is the Partnership Firm Registration Fees?

Are you looking for Partnership Firm Registration Fees then here the details for you. The Partnership Firm Registration cost start from ₹2500 to ₹10000 along with Government Fee ₹500 and Professional Fee ₹2000.

Steps Fees
Partnership Firm Registration Fee ₹2500 to ₹10000
Government Fee ₹500
Professional Fee ₹2000

 

FAQs

According to Section 58 of the Indian Partnership Act, 1932, a firm has the option to register at any time, not just during its formation but even after establishment. To register, the firm needs to submit an application to the Registrar of Firms in the area where any place of business of the firm is located or is intended to be located.

To establish a partnership firm, a minimum of two individuals is required. As per Rule 10 of the 2014 Companies (Miscellaneous) Rules, the Central Government has set a maximum limit of 50 partners for a firm. Consequently, a partnership firm is restricted from having more than 50 members.

To qualify as a partnership, certain conditions must be met: • It should consist of at least two individuals forming an association. • There must be a clear agreement between the partners. • The business undertaken or commercial activity must be lawful. • The primary objective should be to earn and share profits among the partners. • The agreement must establish that the business will be carried out jointly or by any partner representing all, creating mutual agency.

A partnership lacking a registered partnership deed lacks legal recognition. Co-partners within an unregistered firm are unable to lodge formal complaints or initiate legal proceedings against one another. The consequences of non-registration deprive them of such rights as partners in an unregistered firm are unable to enforce any entitlements.

A partnership firm can hold property in its own name as per Section 14 of the Partnership Act, 1932. Any property, rights, or interests in property acquired with the firm's funds are considered to be acquired on behalf of the firm. It's important to note that a partnership is not a juristic person; instead, the legal entity is represented by the partners themselves.

While the registration of a partnership firm is not mandatory by law, it holds significant implications. If a partnership firm remains unregistered, it is restricted from filing suits against third parties. Additionally, partners are unable to file suits against each other, and the firm itself cannot file a suit against any of its partners.

An unregistered partnership deed remains a valid agreement between the partners, but it comes with certain limitations. It cannot be utilized as evidence to resolve disputes between partners or third parties in a court of law. Moreover, partners are unable to enforce their rights or obligations outlined in the partnership deed against third parties.

In an unregistered partnership firm, legal action cannot be taken by one partner against another. Breach of contract or conflicts of interest within unregistered partnership firms cannot be resolved through legal means. Furthermore, the partners in an unregistered partnership firm are unable to enforce their rights under such circumstances.

Obtaining GST registration is not practically possible for an unregistered Partnership firm since a PAN number is a mandatory requirement. As an unregistered Partnership firm, you do not possess a PAN, which prevents you from obtaining GST registration.

Unregistered partnership deeds are agreements executed on a stamp paper and notarized by a public notary. Based on such unregistered partnership deeds, individuals can apply for a PAN card and open a bank account.

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