Partnership Firm Registration

Partnership Firm Registration-

A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments, or combinations. Organizations may partner to increase the likelihood of each achieving their mission and to amplify their reach. A partnership may result in issuing and holding equity or may be governed only by a contract.

A Partnership firm is a business entity created by persons who have agreed to share profits or losses of the business. Partnerships are a very good choice of business entity for small enterprises wherein two or more persons decide to contribute to a business and share the profits or losses. In India, Partnerships are widely prevalent because of their ease of formation and minimal regulatory compliance. Also, the concept of LLP was introduced only in 2010, whereas the Partnership Act of 1932 was in existence before the independence of India. Hence, partnership firms are the most prevalent type of business entity wherein a group of people is involved.

Types of Partnership

There are three relatively common partnership types: general partnership (GP), limited partnership (LP), and limited liability partnership (LLP). A fourth, the limited liability limited partnership (LLLP), is not recognized in all states.

There are two types of Partnership, registered Partnership and unregistered Partnership. In terms of the Indian Partnership Act, 1932 (Act), the only criterion to commence business as a partnership is the finalization and execution of a Partnership Deed between the Partners. The Act does not require the Partnership Deed/Partnership Firm to be registered, and in other words, does not require the Partnership Firm to be a registered Firm. Therefore, various partnership businesses exist as unregistered firms.

There are no penalties for non-registration of a partnership firm, and a partnership firm can even be registered after formation. However, unregistered partnership firms have certain rights denied in Section 69 of the Partnership Act, which deals with the effects of non-registration of a partnership firm.

Cost: The cost for registration of an LLP is normally higher than the cost for registration of a partnership firm. LLP registration can be completed online through LawSathi at just Rs.5999.

Registration of Partnership Firm-

A partnership firm can be registered under Section 58 of the Indian Partnership Act at any time, even after its formation. The registration of a partnership firm is done through the Registrar of Firms in which the partnership firm is situated. When the Registrar of Firms is satisfied that the provisions of Section 58 are complied with, a record of entry of the statement is made in the Register of Firms, and a Certificate of Registration is issued.

Documents for Partnership Firm Registration-

The application for registration of a Partnership Firm must contain the prescribed registration form for incorporation of a company, identity proof/address proof of the Partners, and a certified copy of the Partnership deed.

As identity and address proof of the Partners, any of the following two documents can be submitted:

PAN Card, Passport, Voter's ID, Aadhar Card, Driver's License

Sale deed in case one of the partners owns the place of business

Rental agreement copy if the premises are rented

Copy of the latest electricity bill, water bill, or property tax receipt

Advantages of a Partnership Firm

One of the main advantages of a Partnership Firm is that there are very minimal requirements in terms of compliance. For instance, a Company or LLP requires the annual filing of its financial statements with the Registrar of Companies. Such documents filed with the MCA are also made public documents. On the other hand, registered/unregistered Partnership Firms are not required to file any annual returns, and the financial statements of a partnership firm would NOT be made publicly available. Also, the accounts of a registered / unregistered partnership firm are not required to be audited. Whereas, the accounts of a Limited Liability Partnership (LLP) are required to be audited by a practicing Chartered Accountant when the turnover exceeds Rs 40 lakhs annul or when capital contribution exceeds Rs 25 lakhs.

Disadvantages-

A partnership firm does not provide its Partners with limited liability protection and does not have perpetual existence. Also, the interest of a Partner in a Partnership firm is not easily transferable, and the ownership structure does not allow for investment from Angel Investors, Venture Capitalists, or Private Equity Firms. Banks / Financial Institutions also prefer to lend to Companies than Partnership Firms as Companies are separate entities and the regulatory requirement for financial reporting of Companies - makes a company more transparent and structured.

Partnership Firm Taxation

Partnership firms may be assessed either as a partnership firm or as an association of persons(AOP). Interest paid to partners, salary, bonus, commission, or remuneration to a partner will be allowed as a deduction paid to a working partner who is an individual. However, when the Partnership Firm is assessed as an AOP, the above deductions cannot be claimed. Therefore, for a partnership firm, it is more advantageous to be assessed as a partnership firm than as an AOP. For a partnership to be assessed as a firm, the partnership should be evidenced by a written partnership deed. The income tax return of a partnership firm is filed in Form ITR-5.

Partnership Firm Registration Complete Process

We can help you to register a partnership firm anywhere in India in less than one week. At the beginning of the engagement, an Advisor from LawSathi will brief you about the process and provide you with a list of documents required for registration of a partnership firm. You can submit the required documents and matters through our website. Once the documents and information are verified, a partnership deed will be drafted and sent to the Partners. All the Partners must sign the document on stamp paper and upload a copy on the platform. Once the signed partnership deed is available, it is registered with the concerned Registrar of Firms, and a Certificate of Registration of Partnership Firm is provided. In addition to delivering the Certificate of Registration of Partnership Firm, we can also help you to open a Bank Current Account in the name of the partnership firm.