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. A partnership firm registration is done under the Partnership Act, 1932 with very less documentation and formalities.
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.
Basic Clarification on 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 registration two partners cannot start their business venture.
Things to Consider while Naming the Partnership firm
As long as you satisfy the below-mentioned terms & conditions, any name can be given to a partnership firm. The conditions are given below:-
- The name shouldn’t be too identical or similar to an existing firm operation the same business actions,
- The name shouldn’t contain words like crown, empress, emperor, empire or any other words which show approval or sanction of the government.
Partnership Firm Registration
What are the Benefits of Partnership Firm Registration?
Benefits of Partnership Firm Registration in India are given bellow, which are as follows:-
- Easiest Business Structure
Partnership firms are one of the easiest business structures that can be started by formulating a partnership deed for which partnership firm registration 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 covering 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.
- Raising Funds
In competence 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. It must be noted that 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.
- Ability to file case against Third Parties
The designated partners of the registered Partnership Firm can file a case against Third Parties to resolve disputes that have been aroused during business operation or any other case relating to the Partnership Firm in India.
You must also note that any unregistered Partnership firm loses the right to file the case against third party to resolve any disputes till the procedure of Partnership Deed Registration has been completed.
- Can file suit against Co-partners
It is evident in the contemporary world that the Court of Law best resolves the resolution of any dispute as no one knows when the dispute between the Partners may arises in terms of the sharing of profits or any other case relating to the operations of the Partnership Firm. In continuation to the above said, the Partners of an unregistered Partnership Firm cannot enforce any clauses of registered Partnership Deed.
- Ability to claim Set-off
After availing the Partnership Firm Registration, the partners enjoys the right power to claim set-off. If there is any claim against third Party, Partnership Firm can claim the set-off when any third party files a suit against the registered Partnership Firm. This particular power of claim set-off is not available when the Partnership Firm is unregistered under the Act, Indian Partnership Act, 1932.
- Enjoys Higher Credibility
A Partnership Firm which has successfully completed the procedure of Online Registration of Partnership Firm enjoys higher credibility in comparison to an unregistered Partnership Firm. Even though, both registered and unregistered Partnership Firms are legally valid under the given Act Indian Partnership Act, 1932, the Registered Firm is highly referred in continuation by authorities over unregistered ones.
- Easy Conversion of Entity
The conversion of the registered Partnership Firm into any other establishment such as a Private Company or Limited Liability Partnership, which are broadly known as the corporate structure, can be easily accomplished.
Documents Required for Partnership Firm Registration
Partners need to submit the documents when they are registering the partnership firm, such as partnership deed, PAN Card of Firm, Address Proof of Partners, Office Address Proof, GST Registration, Current Bank Account along with an affidavit certifying all the details mentioned in documents and deed correctly.
- Partnership Deed
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/-
- PAN Card of Partners
All the designated partners of the firm are required to submit their PAN cards as a proof of their identity.
- PAN card of firm
Designated Partners of the Firm need to apply for PAN card of the firm. They have to file Form 49A to apply for a PAN of the firm. They should visit - https://www.onlineservices.nsdl.com/paam/endUserRegisterContact.html
In case the authorized partner signs the application using a DSC, it can be filed in the online mode also. Besides, the application along with the requisite documents must be sent to the nearest PAN processing centers accessible across the country.
- Address Proof of Partners
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 (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.
- GST Registration
The firm needs to submit PAN card number, address proof of the firm and identity & address proofs of partner in order to obtain GST registration. Authorized signatory will sign the application either using DSC or E-Aadhar verification.
- Current Bank Account
The firm needs to submit following documents for opening a current bank account, which are as follows:-
1. Partnership deed
2. PAN card of the Firm
3. Address Proof of the firm
4. Identity proofs of all the Designated Partners
5. Partnership registration certificate (in case registered)
6. Any kind of registration document issued by the Government (GST Certificate will be Valid)
7. Copy of electricity bill, water bill or telephone bill (not more than 3 months old)
8. Authorization letter on the letterhead of the Partnership firm authorizing a partner being the authorized signatory for the Current bank account.
Registration Procedure of Partnership Firm in India
- 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 filled 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 will be 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 of a partnership firm in our country. All you need is the current bank account balance, and rest of the documents as stated above.
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 our assistance in case you need to apply for PAN.
It can take up to 12 - 14 working days in order to Partnership Firm in India. On the other hand, the time taken to issue the COI (certificate of incorporation) may differ as per the rules and regulations of the concerned state. All is subjected to the conditions of Government processing time which differs for each State in India.
In general, the court may deem a partnership not valid when the partnership agreement is not registered in the eye law. The court may consider the partnership not valid and dissolve the partnership if the object of the business is not legal.
If it is a partnership of will, then they can do so by dissolving the partnership by notice if the partners of a firm wished to end the partnership of the firm. This can also be done in accordance with the terms laid out in the Partnership Deed of the firm, or they can do so producing a separate agreement.
Sometimes a partnership certification of incorporation can be revoked which can be termed as dissolution. When all partners or except one partner is declared insolvent or if the firm is carrying unlawful activities, in that case the dissolution can be brought upon automatically. Unlawful activities include like corporate malpractice, trading in drugs or other illegal products, or making business operations with countries that may harm the interest of the country.
For all activities or operations of the firm, during the course of business while the person is a partner, at that time each and every partner is liable individually as well as jointly with all the other partners.