What Is Partnership Firm?
Any group of people who come together to do business must register as a partnership. This is to maintain legal ties and share profits according to the law. We provide the best partnership registration services in Hyderabad. We prepare Partnership Deeds with the assistance of professionals in accordance with the customer’s requirements and register it on the customer’s behalf with the Registrar of Firms.
The most common types of business organizations in India are partnerships and proprietor ships. The appeal of these two types of businesses is that they are reasonably simple to set up and require less legislative compliance than LLP’s and corporations.
Form Your Partnership Company with Ease!
Choosing The Partnership Name
The partners are entitled to name their firm whatever they like, as long as they meet the following guidelines:-
- To avoid confusion, the names should not be too close or identical to that of another current firm conducting similar operations. The reason for this regulation is that a new firm’s reputation or goodwill may be harmed if it adopts a similar name.
- The name cannot include words like Crown, Emperor, Empress, Empire, or words implying or expressing government sanction, approval, or patronage unless the State Government represents its written authorization to use such words as part of the corporate name.
How To Create Partnership Deed?
This is the legal document that spells out the rights and responsibilities of the partners in a partnership.
A written or spoken partnership deed agreement is possible. However, an oral contract is worthless for tax purposes, so the partnership agreement should be reported.
A partnership document must have the following key characteristics:-
1-The firm’s name and address, as well as all of the partners’ names and addresses
2-Nature of business to be carried on
3-Date of Commencement of business
4-time of Partnership (whether for a fixed period/project)
5-Capital contribution by each partner
6-The profit-sharing ratio among the partners
The above are the bare minimum standards that must be included in all partnership deeds. The partners may mention any additional terms.
How To Register :
The Indian Partnership Act of 1932 governs partnerships in India. According to the Partnership Act, partnership firm registration is entirely at the discretion of the partners. The Partners have the option of registering or not registering their Partnership Agreement.
They may not enjoy the benefits that a registered partnership firm receives if the partnership deed is not registered.
Before starting a business, or at any moment throughout the Partnership’s existence, it can be registered. However, if the firm plans to pursue a case in court to enforce contract rights, registration must be completed before the case may be filed.
The method for registration in India is relatively straightforward. An application must be filed with the Registrar of Firms in the state where the business is located, together with the applicable fees. Along with the application, you must also send the following documents:-
- Application for Registration of Partnership in Form No. 1
- Duly filled specimen of Affidavit
- Certified True Copy of the Partnership Deed
- Ownership proof of the Principal Place of business or rental/lease agreement thereof.
All the partners must sign the application or declaration, or their specially authorized agents must do so. When the Registrar is satisfied with the points specified in the partnership deed, he will add an entry in the Register of Firms and issue a Registration Certificate.
Each registered firm’s information is complete and up-to-date in the Register of Firms kept at the Registrar’s office. On payment of the prescribed fees, any individual may inspect this Register of Firms.
Any person interested in seeing the details of any firm can request the Registrar of Firms. Upon payment of the required fees, the applicant will receive a copy of all points of any firm registered with the Registrar.
However, it should be noted that registering with the Registrar of Firms is not the same as registering with the Income Tax Department. It’s a legal requirement for all businesses to register with the IRS and obtain a PAN card.
Following the receipt of a PAN Card, they needed to open a current account in its name and conduct all of its business through this account.
1)Easy to Incorporate
In comparison to other types of business entities, forming a partnership firm is straightforward. By creating the partnership deed and entering into the partnership agreement, this can be incorporated. There are no other documents required outside the deed. It isn’t even needed to be registered with the Registrar of Companies. Because registration is voluntary and not necessary, it can be created and registered later.
In comparison to a business or an LLP, it is subject to far fewer regulations. A Digital Signature Certificate (DSC) and Director Identification Number (DIN), necessary for company directors and designated partners of an LLP, are not required. The partners can readily implement any changes in the business. Their operations are subject to legal constraints. It is cost-effective, and the registration process is less expensive than forming a corporation or a limited liability partnership. The dissolution of a firm is simple and requires few legal procedures.
Because there is no difference between ownership and management, the decision-making process in this kind of firm is swift. All of the decisions are made jointly by the parties and can be executed right away. The partners have a wide range of authority and actions that they can carry out on behalf of the company. They can even act on behalf of the partnership firm without the approval of the other partners in certain transactions.
4)Sharing of Profits and Losses
The earnings and losses of the company are shared equally by the partners. They have complete control over the profit and loss ratio in the firm. They feel ownership and accountability because the firm’s profitability and turnover are based on their efforts. Any losses incurred by the company will be shared equally or according to the deed ratio, reducing the burden of loss on a single individual or partner. They are jointly accountable for the firm’s operations.
The major disadvantage is that the partner’s liability is unlimited. The loss of the firm must be paid out of the partners’ assets. In a business or LLP, however, the responsibility of the shareholders or partners is limited to the value of their shares. All partners are responsible for the liabilities created by one partner. If the firm’s assets are insufficient to cover the obligation, the partners will be forced to pay the creditors from their personal property.
2)No Perpetual Succession
Unlike a company or an LLP, it does not have perpetual succession. This means it will collapse if one of the partners dies or if all but one of the partners becomes bankrupt. It can also be terminated if one of the partners provides the other partner’s notice of the firm’s separation. As a result, it can split at any time.
It can have a total of 20 partners. The number of partners is limited, and as a result, the amount of capital invested in the firm is likewise limited. The total amount invested by each partner makes up the firm’s capital. As a result, the resources are limited, and it cannot engage in large-scale operations.
4)Difficult to Raise Funds
It is challenging to raise funds because it lacks perpetual existence and is a separate legal entity. Compared to a corporation or an LLP, the firm has fewer options for generating capital and expanding its business. People have less faith in the firm because there are no solid legal requirements. The firm’s financial statements do not have to be made public. As a result, borrowing money from outside persons is difficult.
Importance Of Registering :
The Indian Partnership Act makes registration of a partnership firm optional rather than mandatory. It is entirely up to the partners’ decision and is entirely voluntary. The firm can be registered at the moment of its formation or incorporation or at any time during the Partnership’s operation.
However, it is always good to register because registered firms have more rights and benefits than unregistered firms. The following are some of the advantages :
- To exercise his rights from a contract against a partner or the partnership firm, a partner can sue any other partner or a firm. Partners cannot sue the firm or other partners to pursue their rights in an unregistered firm.
- To ensure a contract right, the registered firm can initiate a lawsuit against any third party. An unregistered business cannot bring a case against a third party to enforce a right. Any third party, on the other hand, can sue the unlisted company.
- To enforce a legal entitlement, the registered firm can seek set-off or other legal action. In any proceedings against it, the unregistered company cannot claim setoff.
The process takes about 10 days, depending on departmental approval and reverts from each department.
- Drafting of Partnership Deed.
- Minimum two members as partners.
- Maximum of equal to or less than twenty partners.
- Selection of an appropriate name.
- Principal Place of business.
- PAN card and bank account of the firm.