Overview of Partnership Firm Registration
A partnership firm is a well-recognized business structure formed with mutual consent of all the partners for a profitable purpose. The firm is managed, owned and controlled by a set of people that are known as partners and have some shared capital in the firm.
Partnership firms are distinguished as registered and non-registered firms. Partnership firm registration is not mandatory to register but it is advisable to do so. Partnership firm registration offers various benefits that do not apply to the non-registered ones.
A partnership firm registration is done under the Partnership Act, 1932 with very less documentation and formalities.
Partnership Firm Registration
An association of two or more people who have decided to indulge in business activities is regarded as a partnership firm. The motive of such organization is to earn profit. Members of such a partnership firm are called partners. All the partners share the profits and losses in proportion of their respective ownership.
In a partnership firm, the amount of money contributed is often huge because each partner can contribute to the total amount of capital required. The decision-making process in a partnership firm is a collective business. Every partner should be on the same path before taking any decision. Without partnership firm registrtaion two partners cannot start their business venture.
Documents Required for Partnership Firm Registration
Partnership deed is a kind of agreement formed within the partners which defines their rules, duties, methodology, functions and shares. It helps to avoid future conflicts and disputes between the partners. It is created and signed by all the members on the Judicial Stamp Paper that costs around Rs. 2000/-
All the designated partners of the firm are required to submit their PAN cards as a proof of their identity.
All the partners have to submit a copy of their address proof which can either be their aadhar card, voter id, ration card, driving license, etc. The address and details given in the document should match PAN card details.
Office Address Proof
Address proof of the respective working place has to be submitted. In case of rented property, an applicant has to submit a rent agreement along with a utility bill such as electricity, water, gas bill, property tax bill, etc. Apart from it he/she has to submit the No Objection Certificate or NOC from the landlord. If the place is owned by any partner or partners then the applicant has to submit a utility bill along with a NOC.
Pros and Cons of Partnership Firm Registration
Pros of the Partnership Firm Registration in India
Easiest Business Structure
Partnership firms are one of the easiest business structures that can be started by formulating a partnership deed for which partnmership firm registrtaion is necessary. Hence it can be started when the partners are ready and with minimum documentation whereas other firms require at least 10-15 days to cover up all the formalities like obtaining DSC, DPIN name approval, etc.
Ease in Decision making
It’s easier and faster to make a decision in a partnership firm registration as you don’t have to follow regulations to pass a resolution. A partner can perform transactions on behalf of the firm without any consent of other designated partners.
Incompetence to other firms such as proprietorship firm, funds can be easily raised in a partnership firm. Multiple partners are capable of making more feasible contribution; also banks consider a partnership firm more favorable for sanctioning credits and loans.
Easy Management Without any Disputes
All the partners are assigned works and responsibilities as per their capability, as mentioned in the partnership deed. Partnership deed helps in avoiding any type of conflicts between the partners.
Cons of the Partnership Firm Registration
The liabilities of partners are not limited in the partnership firm that acts as the biggest drawback for the partners. In case of debt or any other misfortune, their personal assets can be used to clear the debts.
A Maximum Number of Members
The maximum number of partners in a partnership firm is limited to 20.
Less Trustworthy for the General Public
A partnership firm is easy to form and can work without partnership firm registration. It can also operate without any strict rules and regulations. These factors make it less trustworthy in the eyes of the general public.
A partnership firm registration can easily be dissolved in case of death or insolvency of any partner. Such conditions hamper the growth of a business.
Registration Procedure of Partnership Firm
Select an Appropriate Name for the Firm
Select a name for your firm that is unique and should not have words like emperor, empire, crown, empress or any other words which show sanction or approval of the government.
File an Application
First of all, the applicant has to file an application in Form 1 of partnership firm registration. An application is filed with Registrar of Firm of the respective state where the firm is located. The application is filled in prescribed format along with specific fees amount.
Preparation of Partnership Deed
Partnership deed is prepared with the consent of all the partners on the stamp paper. Below given components are the parts of partnership deed:
1. Details of the partners and firm such as their name, address, qualification, etc.
2. Nature of the firm or business activities involved
3. Capital contribution made by all partners
4. Shares/Interest of all the partners
5. Profit/loss sharing ratio among all the partners
6. Rights, duties, salaries, commissions, or payable amount of the partners
7. Details of loans provided by the partners
8. Circumstances or process that would be followed in case of death or retirement of any designated partner
9. Other clauses made with mutual consent of all the partners
Submission of the Documents
Submit all the prerequisite documents along with the partnership deed you have prepared.
Verification of Documents and Issuance of Registration Certificate
After submission, documents are closely verified by the authorities. If everything falls under the provisions of act, registration certificate is issued to your firm.Corpbiz provides Partnership Firm Registration service, to avail the service contact our expert consultant.
Frequently Asked Questions
Minimum of 2 persons and maximum of 20 is required for the formation of a partnership firm company.
There is no minimum capital requirement for the registration f a partnership firm in our country. All you need is the current bank account balance.
The partners residing in India can only become the partners in a Partnership firm. Foreign Individuals who wish to start their company can opt for Private Limited Company registration.
Yes, you can convert a Partnership firm into a Private Limited company by filing a prescribed form with the authority.
According to the Partnership Act, 1932, there is no such provision of audit. However, if the turnover is more than INR 2 Crore, then it is mandatory to get the books of account audited.
You can apply for the partnership firm once the partnership deed is notarized. You can take oue assistance in case you need to apply for PAN.