The partnership firm is one of the imperative business forms in the Indian Business market, regulated by the Indian Partnership Act, 1932. Registration of Partnership Firm is not necessarily done before starting a business by forming a partnership but it can be completed anytime during the continuance of a company by agreeing on a Partnership Deed.
As mentioned under the provisions of the Indian Partnership Act of 1932 Registration of Partnership Firm is not compulsory but to take benefits from government schemes and to avoid disagreements and conflicts between the partners, the partnership firm must be registered.
Summary of Registration of Partnership Firm
An alliance of two or more people that come to a conclusion to do business collectively with the purpose of earning profit is considered as a partnership. Members of such alliance are recognized as partners. The firm is owned, managed and controlled by the partners. Partners of the partnership firm share profit and loss as decided in the partnership deed or according to their respective shares in the ownership.
One of the advantages of a partnership firm is that it can be commenced with a massive capital as each partner of the firm can contribute as per their expediency, and the burden of raising capital for the partnership firm will be shared. The decisions making process in a partnership firm is a mutual and collective; approval of every partner is required in a partnership firm before making any decision.
Partnership firms are of two type; those are non-registered firms and registered firms. It is not binding to obtain Partnership firm registration, as mentioned under the provisions of the Indian Partnership Act, 1932 but it is very much prudent to get registration for a Partnership firm, as Registration of Partnership Firm provides wide range of advantages and offers security to the business.
Read our article:Partnership Firm Registration and Annual Compliances
Advantages of Opting Registration of Partnership Firm in India
The Advantages of Registration of Partnership Firm in India are as follows-
Easy Business Structure
The structure of a partnership firm is the easiest business form when compared to another business structures as a partnership firm can be formed by a partnership deed. A partnership deed is the most vital document for registering partnership firm.
Easy Decision Making
In a partnership firm the process of decision making is straightforward and quicker as the partners are not required to follow any set of laws for passing a resolution for every decision made by them. The partners of a partnership firm mutually make decisions.
If it is necessary for the partnership firm, a partner can also perform a business transaction on behalf of the partnership firm without considering it to other partners.
Ease in Raising Funds
In comparison with other business structures such as a proprietorship, a partnership firm can easily raise funds. As each partner of the firm can contribute as per their expediency, the burden of raising capital for the partnership firm will be shared Banks & other financial institutions are more likely to give loans to partnership firms than other business structures.
In a partnership firm, duties and responsibilities are assigned as per the competency of the partners or as stated in the partnership deed. In a partnership deed partners mutually decide the clauses they have to follow. This helps in avoiding conflicts maintains transparency between the partners.
Documents Required for Partnership Deed
There are several documents required for Registration of Partnership Firm but the most important document is Partnership Deed.
A Partnership Deed is a document drafted by the partners in which the conditions and provisions for the partners are included. The Partnership Deed includes following components as mentioned below:-
- Both Partners and Firm name as well as address;
- Nature of Business of the partnership firm;
- Commencing date of partnership firm;
- The duration of Partners (fixed period/ whether for a project);
- Ratio of Profit & Loss sharing among the partners;
- Capital contributed by each partner.
The above specified components are fundamentals that are required in all partnership deeds. If needed, the partners can also cover any other clauses. Some of the further provisions which can be added in the Partnership Deed are listed below:-
- Interest on Partner’s Capital, Partners’ Loan, other Interest (if any);
- Salaries, Commissions, etc. chargeable for partners in the partnership.
- The procedure of audit arrangement and making accounts;
- Distribution of task and responsibility, i.e. the duties, commitments, and powers by all the partners in the partnership firm;
- Set of laws and policy in case of admission of a new partner, retirement of a partner, and in case of death of a partner.
Documents Required of Registration of Partnership Firm in India
For Registration of Partnership Firm, the applicant has to submit the following documents along with the registration application form:-
- Form No.1 duly filled and affixed INR 3 court fee stamp;
- A photocopy of Partnership deed on the minimum stamp paper or Rupees 200;
- Registered document of the property;
- Ownership Proof of Principal Place such as House tax receipt or Electricity bill that must be in the name of the owner of the property;
- NOC or Affidavit on INR 10 and INR 5 Notary stamp;
- Rent agreement (if the premise is rented);
- Address proof of all the partners such as Driving Licence, Voter card or Passport;
- Affidavit or NOC on INR 10 and INR 5 Notary stamp and ownership proof of other places (if mentioned in Form no.1).
Procedure for Registration of Partnership Firm in India
In order to apply for Registration of Partnership Firm, an applicant has to follow the steps given below-
- Name Selection;
- Filing Application;
- Preparation of Partnership Deed;
- Document Submission;
- Issuance of Registration Certificate.
Registration of Partnership Firm is not necessarily done before starting a business by forming a partnership but it can be done anytime during the continuance of a company it just requires a partnership deed.
Partners of the partnership firm share profit and loss as decided in the partnership deed or according to their respective shares in the ownership. For hassle free partnership firm registration, contact our Corpbiz Professional.