Partnership Firm Registration

Partnership Company Registration

A firm or company established between two or more partners with the goal of earning profit is called as a Partnership Firm. It is not compulsory to register a partnership firm but there are added advantages if a partnership firm is registered. Partnership deed is the legal document which is created to form a partnership firm.

Indian Partnership Act 1932 is the governing law which regulates the partnership firms in India. As per the act “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all”. Maximum number of members in a partnership is 10 for a banking business and 20 for other businesses to enter in to a partnership firm.

Partnership firms are not separate legal entity while the partners are can not be debtor or creditor and can not own a property. The property, debit or credit of a partnership firm is actually for the partners in the eyes of law. The manner in which profits or losses are to be shared amongst partners must be explicitly mentioned in the partnership deed to avoid any confusions in the future. Every partner can carry on business on behalf of others.

A partnership firm would be dissolved if the number of partners reduces below 2 in case of death, incapacitation or resignation of a partner.

Advantages of Partnership

Easy to Start

A Partnership is easy to form as no cumbersome legal formalities are involved. Its registration is also not essential. However, if the firm is not registered, it will be deprived of certain legal benefits. The Registrar of Firms is responsible for registering partnership firms.

Business Name

Since the name of a Partnership firm is not registered, a Partnership firm can choose to have any name – as long as it does not infringe on a registered trademark. However, since the name is not registered, any other person can also use the same business name unless trademark registration is obtained.

Annual Filing NOT Required

A Partnership firm is not required to file its annual accounts with the Registrar each year unlike a Limited Liability Partnership or Company. Limited Liability Partnership’s and Company’s are required to file their annual accounts with Registrar of Companies each year.

Essentail of Partnership Deed

While the following clauses are essential in every partnership deed, every deed is not the same. Therefore, you need a customised partnership deed to protect your business interests.

Profit-sharing clause: This indicates how the partners in the firm will divide profits and absorb losses, whether equally or unequally. One partner might be a working partner, wherein he or she has not contributed to the initial capital, and hence, will take a lesser or a percentage of profit, while the others might have put in more capital and, therefore, may get more. A detailed account can be put in the clause, to ease out legal issues at a later stage.

Capital contribution clause: It states the amount of capital brought into the firm by each partner, what it be used for and whether the capital will be repaid on exiting the firm. Here again, the capitals need to be defined completely against the name of each partner, with the essential expenditures that will be done with it. If it is an equal capital partnership, the same will be mentioned.

Dispute resolution clause: It may state that any legal disputes will be settled through mediation or arbitration. One can put in as many clauses under this as possible (since everything needs to be pre-determined or pre-meditated) to make it legally binding.

Retirement/Termination clause: It states the conditions that need to be fulfilled for the termination of a partner, the retirement age and the consequences of either. In case of termination, the clause should indicate what and how a partner will be terminated (illegal transactions, acting against the deed, and so on.) Also, if a person wants to get out of the partnership, what is required to be done, if the capital will be returned, and so on

Compliances for partnership:

• TDS returns to be filed.
• GST returns  to be filed MOnthly & Yearly.
• Income Tax filings Yearly
• Tax Audits.