Partnership Company Registration

A minimum of two Persons is required to start a Partnership firm. A maximum number of 20 Partners are allowed in a Partnership firm.

The Partner must be an Indian citizen and a Resident of India. Non-Resident Indians and Persons of Indian Origin can only invest in a Proprietorship with prior approval of the Government of India.

Yes, a partner can transfer his interest in the business to an outsider, but only with the consent of all other partners.

PAN Card for the Partners along with identity and address proof is required. It is recommended to draft a Partnership deed and have it signed by all the Partners in the firm.

There is no limit on the minimum capital for starting a Partnership firm. Therefore, a Partnership firm can be started with any amount of minimum capital.

As a partner you cannot do the following without the consent of the other partners:-

• Submit a dispute relating to the business to arbitration.
• Open a bank account on behalf of the firm in your own name.
• Withdraw a suit or proceeding filed on behalf of the firm.
• Enter into partnership with an outsider on behalf of the firm.
• Acquire or transfer immovable property belonging to the firm.
• Admit any liability in a suit or proceeding against the firm.

Rajput Jain & Associates will understand your business requirements and help you start a Partnership firm by drafting the Partnership deed. Based on the requirements, Rajput Jain & Associates can also help register the Partnership deed with the relevant Authorities to make the Partnership Firm a Registered Partnership firm.

Only a registered Partnership firm can file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act. Also, only a Registered Partnership firm can claim a set off (i.e. mutual adjustment of debts owned by the disputant parties to one another) or other proceedings in a dispute with a third party. Hence, it is advisable for Partnership firms to get itself registered sooner or later.

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.Better decision making and control over the business.

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 Companies are required to file their annual accounts with Registrar of Companies each year.

Audit NOT Required

A Partnership firm is not required to file audited financial statements with the Ministry of Corporate Affairs each year. Therefore, audit of financial statements is not required. However, tax audit may be required for a Partnership firm if the turnover exceeds prescribed limits.

Partnership firms are registered by the Registrar of Firms, under the Indian Partnership Act, 1932.

I. Form No 1

II. Attested Copy of the partnership deed one set

III. Details required for drafting a partnership deed are as follows :

• Name of the firm.
• Nature of the business to be carried out.
• Names of the partners. The date when each partner joined the firm, The names in full and permanent addresses of the partners, and
• The duration of the firm. The statement shall be signed by all the partners, or by their agents specially authorized in this behalf.
• Pan Card, Identity Proof, Photo & Address Proof of the Partner (s)
• Loans and advances by partners and the interest payable on them.
• The amount of drawings by each partner and the rate of interest allowed thereon.
• Duties and powers of each partner.
• Any other terms and conditions to run the business.
• Ownership proves of principal place of business.
• The town and the place where business will be carried on.
• The amount of capital to be contributed by each partner.

To open a bank account for a Partnership firm, a registered Partnership deed along with identity and address proof of the Partners need to be provided.

Capital is the initial amount in cash or kind contributed by the partners to start the business. It is not necessary for each partner to contribute equally to the capital. Contribution is based on the agreement between the parties

No, a Partnership firm has no separate legal existence of its own i.e., the Partnership firm and the partners are one and the same in the eyes of law. Liability of the Partners is also unlimited, and the partners are said to be jointly and severally liable for the liabilities of the firm. This means that if the assets and property of the firm is insufficient to meet the debts of the firm, the creditors can recover their loans from the personal property of the individual partners.

Partnership firms are business entity that are owned, managed and controlled by one person. So Partners cannot be inducted into a Partnership firm.

There are restrictions on the transfer of ownership interest in a Partnership firm. A Partner cannot transfer his/her interest in the firm to any person (except to the existing partners) without the unanimous consent of all other partners.

Tax will be payable at a flat rate of 30% plus 3% Education cess & Secondary and Higher Education cess on the total of income tax and surcharge.Surcharge has been eliminated AY 2011-12 onwards.General partnerships do not pay income tax. However, the owners or partners of a general partnership do. As with sole proprietorships and limited liability companies, partnerships are pass-through tax entities. This means the profits and losses of a partnership trickle down to the business' owners, who must declare their share of the business' income on their personal tax returns. Partnerships do not have to calculate or pay estimated taxes.

Partnership firm will have to file their annual tax return with the Income Tax Department. Other tax filings like service tax filing or VAT/CST filing may be necessary from time to time, based on the business activity performed. However, annual report or accounts need not be filed with the Ministry or Corporate Affairs, which is required for Limited Liability Partnerships and Companies.

It is not necessary for Partnerships to prepare audited financial statements each year. However, a tax audit may be necessary based on turnover and other criterion.

Yes, there are procedures for converting a Partnership business into a Company or a LLP at a later date. However, the procedures to convert a Partnership firm into a Company or LLP are cumbersome, expensive and time-consuming. Therefore, it is wise for many entrepreneurs to consider and start a LLP or Company instead of a Partnership firm.

A partnership firm can be dissolved in any of the following ways:-

Compulsorily Dissolved

• When all the partners are declared insolvent.
• When one partner is declared as insolvent.
• When the business becomes illegal due to changes in laws

Other Way Of Dissolved

• By agreement
• On the happenings of certain events.