PARTNERSHIP FIRM REGISTRATION

PARTNERSHIP FIRM REGISTRATION

Partnership is a type of business which comprises two or more person who have agreed to work together to achieve the common goal.


Introduction

A partnership firm is easy to form as it has minimal compliance to be followed. Registration of partnership firm is not mandatory but it is advisable to get the firm registered under the Indian Partnership Act, 1932. The firm which is registered under the Act enjoys several benefits as compared to an e unregistered firm.
 

The Indian Partnership Act, 1932, defines the partnership as “the relation between two or more persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”
 

A partnership firm is managed and governed by partnership deed. In order to form a partnership firm, the individuals who have agreed to become the partners of the firm has to make and sign  the Partnership Deed. By this deed, the partners right, liability, profit sharing ratio, capital contribution, etc are governed and protected.

Under the partnership deed name of the business, the nature of the business, its objective, place of business and other relevant information is also mentioned. To form a partnership firm, no minimum capital is required. Therefore, any small business or entrepreneurs who wish to run and form a business can opt for partnership firm.
 

Features of Partnership Firm

To form a partnership firm, minimum compliance is required. It can be formed with two or more partners. It is cost effective and has the entire element to make it a successful venture.

The important features of Partnership Firm are as follows:

  • To form a partnership firm, minimum of 2 persons are required
  • Registration of Partnership firm is optional.
  • To form a partnership fewer formalities are required to be followed.
  • To form a partnership firm, an agreement must be signed between the partners in order to avoid any future differences.
  • No minimum capital is required to form a partnership firm. The partners can contribute any amount of capital to start a partnership firm.
  • The liability of the partners of a partnership firm is unlimited.
  • The continuity of the partnership firm depends on the existence of the partners. If the partners dies or cease to exist, then in this case the firms tends to dissolve.
  • The partnership firm has no separate legal entity.
  • The partnership agreement must contain the profits sharing ratios among the partners in the business in order to avoid any future conflicts.
  • A partner cannot transfer his or her interest unless all the partners agree for the same.
  • An active partner will be responsible for the action of the other partners or members.
  • If the firm is registered under the Indian Partnership Act, 1932, then it will be an added advantage for these registered firms to avail the loan from banks or any other financial institution.
     


 

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Different kinds of Partnership

Partnership at will : This type of partnership exists on the will of the partners, i.e., it can be brought to an end whenever any of the partners gives notice of his intention to do so. 

Partnership for a Fixed Term : If the partnership is created for a certain period of time i.e if the duration of the partnership existence is mentioned in the deed, then it is called as Partnership for a fixed term.

Particular Partnership : If the partnership is formed to carry on a particular venture or one business, then it is called as particular partnership.

General Partnership : In the absence of agreement, the provisions of the Indian Partnership Act 1932 are applicable for general partnerships in which the liability of each partner is unlimited. 
 

Types of Partnership as per Registration

Registered Partnership Firm: The partnership firm that opts to register their firm  under the Registrar of Firm having the jurisdiction as per the state in which the firm is situated. The registered partnership firm gets the legal status in the eyes of the law. 

Unregistered Partnership Firm: This firm is formed on the basis of partnership deed signed by all the partners of the firm. They do not have any legal identity in the eye of law.
 

Procedure to register a Partnership firm

1.  Select a name for the partnership firm: The applicant must select a unique name for their partnership firm. The name should not be identical with any of the existing firm/company name.

2.  To draft a Partnership Deed: The Partnership deed is one of the most important documents for partnership registration. The deed provides the following information about the firm-

  1. Name and address of company and all partners
  2. Contact details of partners
  3. Nature of the business
  4. Duration of the partnership
  5. Profit/Loss sharing ratio
  6. Rules regarding the solvency of the firm
  7. Capital contribution by each partner
  8. Establishment date of partnership firm
  9. Interest rate on borrowed capital or loan
  10. Rights and duties of each partner
  11. Rules for settlement of disputes among partners
  12. Rules in case of admission, retirement or death of partner
  13. Any other aspect regarding the code of conduct of business

Apart from the above information the Deed also provide information about the partner’s remuneration in excess of the profit shares, audit procedures, etc.

3.  To finalize the Deed: In order to make the deed legal, it should be provided to each partner in written form on the stamp paper. The deed should be duly signed by all the partners in front of the notary officer. The value of the stamp varies from state-to-state. The signed deed copy is to be submitted to the Registrar during the registration process.

4.  To apply for a PAN Card : The applicant has to make an application for PAN card in the name of the partnership firm. This is one of the mandatory documents for partnership registration process.

5.  To make registration application: The applicant has to furnish information regarding the name of the firm, the nature of the business carried out, address of the business, names and addresses of all the partners, date of commencement of business for making registration application. This application has to be submitted at the time of registration.

6.  To submit the necessary documents:

 The following documents are to be submitted along with the registration application to the Registrar for partnership registration process:

  • Form 1 has to be submitted. Form 1 is application for registration of partnership firm.
  • A copy of notarized partnership deed 
  • Specimen of Affidavit
  • Firm’s PAN card
  • Address proof  of the partnership firm like ownership deed, lease and rent agreements, etc. 
  • Partner’s Identity proof and address proof.

To pay the applicable fees and stamp duties: At the time of submission of the documents with the Registrar, the applicant has to pay registration fee and a stamp duty. The fees will be different in various states. 

7.  Registration Certificate: If all the documents found true and correct ,then the registrar will issue a registration certificate.

Note:

a.  The firm that gets registered, are required to add “Registered” after its name.

b.  Now many states provide the facility of online registration of the partnership firm.  In case of the online registration of partnership firm:

  1. The applicant is required to file an application online. 
  2. The applicant has to furnish the same information on this form as it’s done in offline mode.
  3. After the submission of the application, an acknowledgement number will be provided which will be used later to login to submit all the above mentioned necessary documents for the registration. 
  4. The applicant has to upload the scanned copies of all the above mentioned documents. 
  5. After proper scrutiny of the application form and the docments, if found correct and fair, registration certificate will be sent through an email.
     
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Frequently Asked Questions (FAQ’s)

What is the definition of Partnership as per the Indian Partnership Act, 1932?

The Indian Partnership Act, 1932, defines the partnership as “the relation between two or more persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”
 

Which act governs the Partnership Firm?

The partnership firm if registered, then it is governed by Indian Partnership Act, 1932.
 

How many people are required to form a Partnership firm?

Partnership firm can be formed with 2 or more person who have agreed to work together to achieve the common goal.
 

What are the different kinds of partnership firm?

The different kind of partnership firm is General Partnership, Partnership at will, Particular Partnership, Partnership for a fixed term.
 

Can a new partner be added in the partnership firm?

Yes, a new partner can be added in the partnership firm, if the admission of the new partner clause as mentioned in the deed permits to do so.
 

Can a partnership deed be amended?

Yes, a partnership firm can be amended if any new partner comes or existing partner goes out, if capital contribution changes, if profit sharing ratio changes etc.
 

What are the documents required for registration of  a Partnership firm?

The documents required for registration of a partnership firm are:

  • Form 1 has to be submitted. Form 1 is application for registration of partnership firm.
  • A copy of notarized partnership deed 
  • Specimen of Affidavit
  • Firm’s PAN card
  • Address proof  of the partnership firm like ownership deed, lease and rent agreements, etc. 
  • Partner’s Identity proof and address proof.
     
Is it compulsory to pay stamp duty at the time of registration of partnership deed?

Yes, it is compulsory to pay a stamp duty at the time of registration of partnership deed. The stamp duty differs as per the different state.
 

Can a partnership firm be dissolved?

Yes, a partnership firm can be dissolved as per the partnership deed.
 

Is it mandatory to draft a partnership deed?

It is not mandatory. But in order to avoid any future conflict between partners regarding the profit sharing ratio etc., it is advisable to draft a partnership deed.
 

Edited by Minu Mishra

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