Partnership Firm Registration

Benefits, Necessary documents, Procedure for Registration and Legal Compliances of Partnership Firm in India.

What is a Partnership Firm?

As per Section 4 of Indian Partnership Act 1932 "Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

Persons who have entered into partnership with one another are called individually, "partners" and collectively "a firm", and the name under which their business is carried on is called the "firm-name".

A partnership is a form of business where two or more people share ownership, as well as the responsibility for managing the company and the income or losses the business generates. It is not compulsory to Register a Partnership Firm. But if the Partnership is not registered, a partner cannot enforce its rights given under the Indian Partnership Act, 1932. In case of dispute with the third party, the firm cannot claim for setoff; however, the third party will be able to sue the Partnership Firm.

Benefits of Registering a Partnership Firm

- Only two persons are required to forma a Partnership Firm

- Responsibilities and duties are shared among the partners of the Firm

- Easy to set-up as partnership firm registration is optional

- Registration formalities are Minimal

- Statutory Compliances are limited

- A minor cannot become a partner without the approval of other Partners

- Flexibility in decision making

- Establishment expenses are very less

Steps to Register a Partnership Firm

1. Selection of Name by Partners

2. Creation of Partnership Deed

3. Registration of Partnership Firm

4. Issue of Registration Certificate of Partnership firm by Registrar

5. Bank Account Opening (within 30 days)

6. GST Registration (If turnover exceeds statutory limit)

7. Intellectual Property Registration to protect trade mark (if required)

Main Points to be considered while drafting a Partnership Deed

- Detail of the firm and its partners such as name and address

- Nature of the Partnership Firm

- Detail of capital contributed by each Partner

- Profit/loss sharing ratio among the partners

- Interest on capital if any

- Detail of drawings by partners or loans provided by partners

- Salaries, commissions or any other amount to be payable to partners

- Rights and duties/obligation of each Partner

- A process which will be followed in case of retirement or death of any partner

- Other mutually decided clauses

Documents Required to Register a One Person Company

To Register a Partnership Firm the following documents are necessary:

- Form No. 1 Partnership Firm registration application

- Certified Copy of notarized Partnership Deed on stamp paper

- Specimen of Affidavit

- Ownership documents in case property are owned.

- If office is on rent, then rental agreement as a proof of principal place of Business

- ID Proof and address proof of all the partners (PAN/ Aadhar Card/ Driving License/ Copy of voter ID/ Passport)

Mandatory statutory Compliances of Partnership Firm

- It is mandatory to apply for Income Tax Permanent Account Number (PAN)

- It is Mandatory to file Income Tax Return irrespective of turnover

- If turnover crosses statutory limit, GST Registration is Compulsory