Partnership Firm Registration
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A General Partnership is a business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in the Partnership Deed. This structure is thought to have lost its relevance since the introduction of the Limited Liability Partnership (LLP) because its partners have unlimited liability, which means they are personally liable for the debts of the business. However, low costs, ease of setting up and minimal compliance requirements make it a sensible option for some, such as home businesses that are unlikely to take on any debt. Registration is optional for General Partnerships.
6 Essential Facts on Partnership
What is a partnership firm?
A partnership firm is a business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Deed that may or may not be registered. In such a business, the members are individually partners and share the liabilities as well as profits of the firm in a predetermined ratio.
Why should I set up a partnership firm?
A partnership firm is best for small businesses that plan to remain small. Low costs, ease of setting up and minimal compliance requirements make it a sensible option for such businesses. Registration is optional for General Partnerships. It is governed by Section 4 of the Partnership Act, 1932. For larger businesses, it has lost its relevance with the introduction of the Limited Liability Partnership (LLP). This is because an LLP retains the low costs of a partnership while providing the benefit of unlimited liability, which means that partners are not personally liable for the debts of the business.
Is a partnership firm a separate entity?
The partners in a partnership firm are the owners, and thus, are not separate entity from the firm. Any legal issues or debt incurred by the firm is the responsibility of its owners, the partners.
How many partners can there be?
A partnership must have at least two partners. A partnership firm in the banking business can have up to 10 partners, while those engaged in any other business can have 20 partners. These partners can divide profits and losses equally or unequally.
Is partnership firm registration necessary?
No, registration of a partnership is not necessary. However, for a partner to sue another partner or the firm itself, the partnership should be registered. Moreover, for the partnership to bring any suit to court, the firm should be registered. For this reason, it is recommended that larger businesses register the partnership deed.
What are the main aspects of a partnership deed?
The deed should contain names of the partners and their addresses, the partnership name, the date of commencement of operation of the firm, any capital invested by each partner, the type of partnership and profit-sharing matrix, rules and regulations to be followed for intake of partners or removal.
Documents Required for Partnership Registration
Form No. 1 (Application for registration under Partnership Act)
Original copy of Partnership Deed, signed by all partners
Affidavit declaring intention to become partner
Rental or lease agreement of the property/campus on which the business is set
Advantages of a Partnership
General Partnerships do not need to appoint an auditor or, if unregistered, even file annual accounts with the registrar. Annual compliances are also fewer as compared to an LLP. General Partnerships do need to file Income Taxes and, depending on turnover, service and sales tax.
Easy to Start
It can be started with just an unregistered Partnership Deed in 2 to 4 days; registration, however, does bring a few advantages. It would enable you to file suits in court against another firm or partners in the firm for the enforcement of rights arising from a contract or right given by the Partnership Act.
A General Partnership is cheaper to start than an LLP and even over the long-term, thanks to the minimal compliance requirements, is inexpensive. You would not need to hire an auditor, for example. This is why, despite its severe shortcoming (unlimited liability), home businesses may opt for it.
General Partnership Procedure
4 WORKING DAYS
Once you send in a request, our representative will get in touch with you to understand your requirements. If further details are required, we will contact you for the same. Once these are in, a lawyer will work on the request and send it to you for review within 3 to 4 working days. Feel free to get back to us if you would like any changes.
4 WORKING DAYS
In case you would like any changes to the agreement, our lawyers will work on them. Two rounds of iterations are included in the original price.