Partnership Firm Registration

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Partnership Firm Registration

A partnership firm is a type of business entity in which two or more individuals come together to carry out a business venture with the aim of earning profits. Partnership Firm Registration is the process of legally registering the partnership firm with the concerned authorities, which gives it a separate legal identity and enables it to conduct business operations in a structured and organized manner.

In India, partnership firm registration is done under the Indian Partnership Act, 1932. To register a partnership firm, the partners must first agree on the terms and conditions of the partnership and create a partnership deed, which is a legal document that outlines the rights, responsibilities, and obligations of each partner. LLP Registration has seen more rise in the place of Partnership Firm Registration due to various benefits.

The partnership deed should include details such as the name and address of the firm, the names and addresses of the partners, the nature of the business, the duration of the partnership, the capital contributions of each partner, the profit-sharing ratio, and the terms of dissolution.

Once the partnership deed is created, the partners must submit an application for registration of the partnership firm to the Registrar of Firms in the state where the firm is located. The application must include a copy of the partnership deed, proof of address of the firm, and proof of identity and address of each partner.

Upon verification of the application and documents, the Registrar of Firms will issue a Certificate of Registration, which confirms that the partnership firm is legally registered and can commence its business operations. It is important to note that registration of a partnership firm is not mandatory, but it is recommended as it provides various benefits such as legal recognition, ease of doing business, and access to credit facilities.

Documents Required for Partnership Firm Registration

The documents required for partnership firm registration in India are as follows:

  • Partnership Deed: The partnership deed is a legal document that outlines the terms and conditions of the partnership, including the nature of the business, profit-sharing ratio, capital contributions, and the rights and responsibilities of each partner.
  • PAN Card: The partners must provide their PAN cards, which are issued by the Income Tax Department, to register the partnership firm.
  • Address Proof: The partners must provide address proof such as Aadhaar Card, Voter ID card, Passport, Driving License, or any other government-issued document.
  • Identity Proof: The partners must provide identity proof such as Aadhaar Card, Voter ID card, Passport, Driving License, or any other government-issued document.
  • Rental Agreement or Property Documents: If the partnership firm is located in a rented premises, then the partners must provide a rental agreement. If the firm owns the premises, then property documents such as sale deed or property tax receipt must be provided.
  • NOC from the landlord: If the partnership firm is located in a rented premises, then the partners must obtain a No Objection Certificate (NOC) from the landlord allowing them to use the premises for commercial purposes.
  • Bank Account Proof: The partners must provide a bank account statement or a cancelled cheque to prove that they have a bank account in the name of the partnership firm.
  • Photographs: The partners must provide passport-sized photographs for the registration process.

It is important to note that the above-mentioned documents may vary depending on the state in which the partnership firm is being registered.

Features & Benefits of Partnership Firm Registration

  • Minimum members – Minimum Number of partners are two and the maximum limit is up to ten in case of banking business and twenty for all other categories of business.
  • Partnership agreement – A Partnership deed is signed between all the partners entering into the partnership business, which is a written contract having a contractual relationship between the partners.
  • Competent – All the partners should be competent to enter into the partnership agreement and not be a minor in age or intellectually.
  • Sharing – The profit and losses are to be shared per the ratio as agreed between the partners or equally if nothing is specified.
  • Unlimited Liability and business continuity – Unlimited liability of the partners and no distinct legal status separate from the partners, having no perpetual succession prevails in partnership firm.

Partnership deed

This is an agreement between the partners who have entered into the partnership which lays all the rights, duties, profit and loss sharing ratio and all other obligations of the partners.

Partnership deed can either be written or oral as per the choice of the partners, however, it is always advisable the contractual relationship is established in writing to avoid any future conflicts or litigations.

The deed contains the general and specific details. Some are stated below:

  • Name and address of all the partners
  • Nature of the business firm
  • Capital contributed by each partner
  • Profit and loss sharing ration as agreed upon
  • Date of starting the business firm
  • Duties, rights, obligations of each partner
  • Other clauses as required by partners on mutual consent

Timeline for Partnership Firm Registration:

The Partnership registration firm process usually takes up to 2 weeks or so. However, the situation may vary from state-to-state Registrar depending on the requirement of the concerned regulation applicable.

Advantages and Disadvantages of Partnership Firm:

Advantages

Disadvantages

Easy to incorporate

Unlimited liability

Simple requirements

No perpetual succession

Quick decision making

Raising Funds

Less compliance

Restricted growth

Sharing of Profit and loss  

Unorganised functioning

 

Importance of Partnership Firm Registration:

Though the registration of partnership firm is not compulsory under the Act, it is advisable to register due to its importance and benefits such as:

  • 1. If any issue arises, the partner can sue other partners or partnership firm enforcing its rights per the contract against the parties. If the Partnership Firm is unregistered then partners cannot sue against the firm or other partners in any situation enforcing the rights.
  • 2. The partnership firm which is registered can file a suit against any third party enforcing its rights per the contract, which if unregistered cannot be done.
  • 3. The partnership firm which is registered can claim set-off and other related proceedings, wherein the unregistered partnership firm will not have this benefit to enforce the rights.

Bonus Points: The registration of partnership can be revoked in future on happening of certain situation known as ‘dissolution’. Dissolution is brought upon when all the partners of the firm except one is declared insolvent or the partnership firm is carrying on unlawful business activities. Also, any kind of loss or injury which is caused to any third party, or a penalty levied during the course of business, all the partners of the firm will be held liable even where the injury or loss which happened was due to any one of the partners. For all your queries, feel free to connect at info@ccoffice.in or 9988424211.

Frequently Asked Questions (FAQs)

Partnership firm registration is not mandatory in India, but it is recommended to obtain legal recognition and avail the benefits of partnership registration.

The minimum number of partners in a partnership firm is 2, and the maximum number is 20.

The cost involved in partnership firm registration depends on various factors such as the state in which the partnership firm is being registered, the professional fees charged by the lawyer or consultant, and the stamp duty and registration fees.

The time taken to register a partnership firm in India depends on various factors such as the state in which the partnership firm is being registered, the completeness and accuracy of the application, and the workload of the Registrar of Firms. On average, it takes about 15-20 working days to obtain the Certificate of Registration.

Yes, partnership firm registration can be done online in India through the Ministry of Corporate Affairs (MCA) website if you are choosing to register it as Limited Liability Partnership Firm.

Yes, a foreigner can be a partner in a partnership firm in India, subject to the rules and regulations of the Foreign Exchange Management Act (FEMA).

Partnership firm registration in India provides various advantages such as legal recognition, ease of doing business, access to credit facilities, and protection of partners' rights and interests.

A partnership firm is taxed as a separate entity under the Income Tax Act, and the partners are taxed individually on their share of profits. The partnership firm is also required to file income tax returns and pay taxes on its profits.

No, a minor cannot be a partner in a partnership firm. However, he or she can be admitted to the benefits of partnership with the consent of all the partners.

The Certificate of Registration is valid for the lifetime of the partnership firm, unless it is dissolved earlier.

Yes, a partnership firm can be converted into a company under the provisions of the Companies Act, 2013 or LLP under the LLP Act, 2008.

Yes, the partnership deed can be modified after registration with the consent of all the partners. However, the modified partnership deed must be registered with the Registrar of Firms.

Compliance Calendar LLP have a team of Professionals who are experts in the field of Partnership Firm/ LLP Registration. You can book a consultation at info@ccoffice.in or connect at 9988424211.