WHAT IS A PARTNERSHIP?
Amongst the multiple form under which business can be registered, partnership firms registration online depict a setup where persons involved in the business agree 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”.
If compared against other business structures, incorporation of partnership firm if simpler and an efficient way to start off as it requires lesser compliances and formalities. Additionally, the operational responsibilities are shared by the partners contrary to the sole proprietorship structure where one person has all the responsibility.
Benefits of Partnership Firm
Consider this, the partnership firm is one of the most practical means to engage in any joint venture.
To begin with, first and foremost, it is easy to establish as it doesn’t require much legal compliance in contrast to the corporate form of business. You can have a tailor-made Partnership Deed where you decide how you share profits, management rights, and conflict resolution process.
Then secondly, you can combine capital resources and different skills needed for your business without unnecessary bureaucracy of LLP and Pvt Ltd forms of business.
And last but not least, you are to use the “flow through taxation.” In other words, your firm’s profits go straight to your personal income taxation form, which saves you from double taxation that corporate firms usually experience.
Partnership firm registration cost is less as compare to another form of business registration in India.
Minimum Legal Requirements
For the existence of a partnership firm Registration India, the following statutory requirements must prevail together:
- Plurality of Individuals: For registering Partnership firm it should be the association of two or more persons who are of legal competence.
- Relationship through Contract: There should be a contract and not the status, succession, or legal relation in order for the partnership business to be formed.
- Purpose must be Lawful: It must be intended for doing business continually; otherwise, one-time business or charity business cannot be termed as a partnership.
- Profit Sharing: This is another necessary requirement which means that there must be an agreement on the profit sharing among the partners in the partnership contract. While loss sharing is also a common practice, a partner cannot be relieved of profit but of loss only.
- Agent Principals Relation: Another important test of the partnership business is agency relation whereby business is done either by all the partners or by some partners in the name of all the partners.
Documents required for Partnership Registration
In order to registration of firm at the Registrar of partnership Firms, the following documents should be collected and submitted:
- The Partnership Deed: the core document, which is supposed to be drawn up and signed by all members using judicial stamp paper, notarized. The Partnership Deed contains information about capital contribution, profit share ratio, and other conditions.
- Form No. 1: which is signed by all members and includes data on firm name, address of firm's main office and names with full permanent addresses and dates of becoming members.
- Affidavit of Affirmation: The affidavit stating the affirmation of the truth and verity of the information supplied on Form No. 1 and in the Partnership Deed.
- Proprietorship Proof: If the property belongs to the firm then a copy of deed or electricity bill.
- If the property is rented: The lease contract along with No Objection Certificate (NOC) signed by the owner of the property.
- Address and Identity Proof: PAN card, Aadhaar card, passport, or voter ID.
Naming of a Partnership Firm
The naming of a partnership firm can be done by following the procedure, as long as the following conditions are fulfilled:
a. The name should not be too much similar or identical with the name of an established company doing the same business.
b. The name does not include terms such as emperor, crown, empress, empire, or anything other than government approval or permission.
What is a Partnership Deed?
In layman terms it can be understood as a contract executed among the partners and deals with the structure to be followed upon commencement of business. The Partnership Deed lays down the foundation for the legislation of any partnership firm, and is essentially a contract that regulates the rights, duties and liabilities of the partners. Some of the clauses that need to be incorporated into the Partnership Deed Template while drafting the same are:
- Capital Contribution Clause: This clause will define the exact amount of contribution from each partner.
- The Profit and Loss Sharing Ratio: It will determine the exact percentage share in the profit or loss of the partnership firm.
- Management and Voting Clauses: This will detail the powers and responsibilities of the partners in the management of the firm.
- Dispute Resolution Clauses: The clause will include mandatory arbitration/mediation procedure to avoid litigations.
- Dissolution of Partnership Firm and Retiring Partner: It will explain how the dissolution of the partnership firm takes place.
The above clauses in a deed will form the foundation of partnership deed registration.
How to Register Partnership Firm
For the registration of partnership deed and formalization of your entity, there is a particular statutory procedure that needs to be followed. However, the actual portal would vary slightly depending on your state (Registrar of Firms in your state); however, the entire process of registration remains the same and follows a standard procedure.
Process of Registration of firm in Partnership Act
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Drafting of Partnership Deed: Mandatory Requirement.
Draft a written document including all necessary clauses related to capital, profits or loss sharing, and dispute settlement. Have it printed on non-judicial stamp paper of required value as per your state regulations and sign it along with the witnesses present.
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Get the Deed Notarized: Within timelines.
Execution of stamp document must be taken to an authorized Notary Public who will check the identity of the signatories and get the deed notarized.
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Applying for Firm PAN and TAN: Tax Compliance.
Before making the approach to the Registrar, get your deed notarized and then apply for Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) at the tax office. It is important to note that a partnership firm is a separate tax paying entity.
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Filling of Prescribed form to the Registrar of Firms:
Make the filing of the prescribed form with the Registrar of Firms where it should be noted that the form would require the signatures of all the partners along with the notarized deed, proof of business address (like lease deed, etc.), and ID proofs of partners.
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Payment of Statutory Fees: Processing step.
It involves making the required payment towards registration and processing of the form to the government treasury. It is generally done through the e-granthi or treasury portal of the respective state and the receipt is issued.
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Issuance of Certificate of Registration: Final Approval.
Once the application is scrutinized by the Registrar and the instruments are found valid under the Partnership Act, then the registration is granted in the Register of Firms and will issue Partnership firm registration certificate.
Registration of Partnership Deed
It is not compulsory to register a partnership deed nor there is any time-limit prescribed by the Partnership Act 1932 regarding registration of a Partnership firm. It may be registered any time on or after the day of its formation. Following are the steps involved in the registration of partnership deed with the registrar of Partnership of the Respective State:
STEP 1: Selection of Name:
You should choose a name that does not imitate any other registered name or does not use terms that break any rule. Search the available name that MCA for a safer side in the event that your name is not already registered. You may also receive a trademark name and logo for legal protection.
STEP 2: Drafting & Finalisation of Partnership Deed:
The partnership deed should be carefully and meticulously drafted and signed by both the partners once they mutually agree to the terms of the partnership. The deed should contain all the details mentioned above. The deed should be printed on stamp paper of appropriate amount of stamp duty in accordance with the Stamp Duty Laws of the respective state.
STEP 3: Notarizing of Partnership Deed
On execution of the deed, the same shall be attested by a notary public after examining the deed and stamp duty paid on the partnership firm.
STEP 4: PAN Application
Post the attestation of the partnership deed, the partners should apply for the PAN of the partnership deed, in compliance with the Income Tax Laws of India. A partnership firm is not considered to be different from its partners, yet, it is advisable to obtain a separate PAN for the firm apart from the partners.
STEP 5: Application for Registration
Apllication for registration of partnership firm should be carefully drafted and should contain all the relevant details regarding the partners, partnership firm, business activities, address of the firm, commencement date of the firm. Theis application hall be signed by both the partners and notarised.
STEP 6: Submission of the Application
Post the attestation of the application by notary public, the Application for registration shall be submitted with the registrar of Partnership along with the following attachments:
a. Certified copy of Partnership Deed
b. PAN of the firm
c. Proof of registered office of the firm (Registry, Lease deed, Rent agreement, etc)
d. ID and address proof of all the partners
e. An affidavit declaring and certifying the accuracy of the particulars of the application.
STEP 7: Fees & Stamp Duty
The process of submission of application is complete only after submission of the form along with the respective stamp duty and prescribed registration fees. In India every state has the right to prescribe its own provision pertaining to fees & stamp duty for registration of a partnership firm.
STEP 8: Issuance of Registration Certificate
The Registrar meticulously examines the application for defects or incompleteness. Once the registrar is satisfied that the application if complete in all aspects, He/She issues the Certificate of Registration of Partnership. The Certificate if sent on the email of the partners and also to the registered office of the Firm.
TIPS FOR A SUCCESFUL PARTNERSHIP BUSINESS