The partnership is the most common form of business structure in India which is most favourable amongst medium-sized businesses. A partnership firm is created by two or more partner who comes together to join their resources for mutual benefits by sharing profit and loss in a prescribed ratio.
However partnership registration is not mandatory in India but getting it registered provides the legal existence to it and makes it easier to convert it later into other entities such as LLP, Company, etc. Partnership firm and Partnership Firm Registration are being discussed henceforth.
Partnership Firm Registration Process
A partnership firm can be registered by following these steps:
- Select the suitable name for partnership: Choose an appropriate name for your partnership firm which shall not resemble any other name registered or shall not use the words violating any law. For a safer side, check the name availability through MCA in case of the name as desired by you is not already registered. You can also get your name and logo registered as a trademark to secure it legally.
- Draft Partnership Deed: Partnership Deed contains the details of the rights & obligations of partners along with minute details about the firm. Common points forming the part of partnership deed are:
- Name & address of the firm
- Complete information about partners such as name, address, contact details, etc
- Nature and activities of the business
- Duration, if any
- Contribution of each partner
- The ratio in which the profit will get shared amongst the partners.
- Finalise the partnership deed as per the prescribed format: After drafting the deed, get it finally executed by printing it on stamp paper with the proper notary and by affixing the signature of each partner. Stamp duty payable in one state can be different in others.
- PAN Application for partnership firm: From the perspective of taxation, a partnership firm is not distinct from its partner; still it is advisable to get the PAN in the name of partnership irrespective of the fact whether you register your firm or not.
- Registration Application: Complete the application by including all the details of the firm, necessary information about a firm, partners, contributions, location of the firm, duration of the firm, and the date of commencing the business. Each partner shall sign the application & get it notarised.
- Submit the Application: File the application to Registrar of Company for its registration along with the following documents:
- Certified copy of Partnership Deed
- PAN of the partnership firm
- Supporting document for registered offices, such as registry in case the premise is owned otherwise rent agreement or NOC by the landlord
- ID proof and address proof of all the partners
- Declaration if affidavit certifying the correctness of the application.
- Stamp Duty and Fees: Complete the registration process by final submission of the application along with the payment of prescribed fees and stamp duty for partnership registration. Fees and stamp duty depends upon the state in which the firm is registered
- Registration Certificate: Once the applicant sends the final application to the registrar, he will verify the same and issue the registration certificate by sending it on mail id.
Types of Partnership Firm
There are two types of partnership firm that operates in India:
- Registered: partnership can be registered under Registrar of Firm having the jurisdiction as per the state on which firm is registered. The registered firm gets the legal status in the eyes of the law and thus get legally recognised.
- Unregistered: Unregistered firms get established by mare formation of partnership deed. Unregistered firms are regulated and govern as per the clause of the deed, and the partner’s rights and obligation are defined as per deed.
Characteristics of Partnership Firm
Following are the aspects of a partnership firm that makes it a favourable choice amongst various other business structures:
- The partnership is governed and came into existence by a simple creation of partnership deed.
- A partnership firm can be created to carry on the business of any nature, industry or profession
- Partners have to share the profit in pre-determined ratio and mutually agreed to bear the losses as well
- Business can be undertaken by all partners of even by one partner acting on behalf of every other partner
- Partners are personally liable for the loss or debt incurred in the business, i.e., their assets can be used to dispose of the losses.
- Partners can transfer the shares only after receipt of the consent of every other partner
- A partnership firm has no fix duration and can be continued for as long the partners want. However, in the case of two partner firms, the firm will come to an end in case of anyone deceased, becomes insolvent or retires.
Partnership firm plays a vital role in the success of new ventures. The partnership is formed with the motive of profit sharing, along with shared losses or uncertainty. For further assistance & information on the essential procedure to be followed before Starting the Partnership firm Online with consultant, you can contact us.
Registration of a partnership firm is not compulsory. A partnership between 2 or more people is an arrangement where they agree on an object and are bound by agreed terms while performing their duties to achieve a common goal.
Partnership can be formed for any purpose. If you want to promote any social activity with your friend, you can form a partnership. In most of the cases, a partnership firm is referred to partnership firms formed for carrying a business.
If you have started a partnership business with your friend, the very first question you will have is how to register your partnership firm.
You do not have to compulsorily register your partnership firm, but registration have its own benefits.
You can carry on the business even without registering your partnership firm. To start your business without registering your firm, you can simply put down the partnership agreement on a stamp paper and apply for PAN. Once PAN card is received, you can proceed for opening of a bank account.
If you are not satisfied with an unregistered partnership, read this article to understand what is registration and how to do it.
In this article I will explain you everything about registering you partnership firm.
Registration of a partnership is compulsory?
No, registration of a partnership firm is not mandatory.
A partnership is a binding agreement, and law has given the option to partners to whether they want to register their agreement or not.
It is not compulsory that you have to register your partnership.
What is registration?
Registration is the process of registering your documents/agreements/deeds etc. with a registrar.
Even if you register your agreement with registrar the status remain same. Whether you register or not, your status will remain as partners and your association will be as a partnership firm.
For example, A and B came together to form a partnership to run a business.
Now A and B are confused on type of documents they are suppose to create to form a partnership firm and represent to outside world.
A and B have to enter into an agreement in written. Once they have entered into agreement on a written document, they have formed their partnership firm.
Yes, its that simple. Forming a partnership is second easiest thing after proprietorship.
Why do people register partnership firms if it is not compulsory to register?
You with your friend drafted an agreement on a stamp paper and are carrying your business. World is dealing with your firm.
You business is growing and nothing seems to be wrong.
If everything is going smooth, then why do few register partnership deed and few not?
Your question is very valid. If a partnership deed is not registered and without registration of deed one can do business then why one has to register the firm.
Well, everything has a value. Registering a deed cost very little money but it has value of money spent.
Consequences of not registering a partnership deed
- Partners cannot sue unregistered firm
- Partners cannot sue each other
- Firm cannot sue any third party
- No arbitration or set off possible in case of suit filed by any third party
However, any third party can always sue the unregistered firm or its partner.
Hope, now it makes sense that registering partnership deed is important. If you are dealing at a small level and risks, rewards are not very high you can continue with an unregistered partnership firm, however once your business grows and your contract list grows it is a wise decision to register your partnership deed.
How to register a partnership firm or partnership deed?
- Draft agreement on a stamp paper,
- File application with Registrar of firms for registration of deed and
- Once your firm name is entered in register of firms, certificate of registration is issued.
Lets break these steps further.
Drafting a partnership agreement
To enter into a partnership, first you have to draft an agreement. Agreement should contain all possible duties, rights and goals of partnership.
For example, a partnership agreement should contain at least following points.
- Name, age, and address of partners,
- Place of agreement,
- Date on which partnership comes in force,
- Object of partnership,
- Nature of activities to be carried out,
- Duties of partners,
- Rights of partners,
- Name of the firm,
- Place of business,
- Tenure of the partnership.
Above list is just a basic framework. Partnership agreement should contain all possible events that could arise in future and your all future disagreements should find answer in your partnership deed.
Registering partnership agreement/firm/deed with registrar of firms
Registering a partnership firm or a partnership agreement is very straight forward.
You have to make an application to registrar of firms in Form No. 1.
Registration fee has to be paid. Fee differs in each state. You can visit your nearest Registrar of firm located in your area or check state revenue website for fee details.
For example, in Karnataka fee to be paid to registrar of firms in mentioned in website.
Registrar will enter the name of firm in register of firms and issue certificate.
Anyone from public can view your firm details available with registrar with payment of a fee.
Registering Partnership firm with Income Tax Department
Registration with registrar of firm is second step in entire registration cycle. Whether you have registered your firm with registrar or not, you should register your firm with Income tax department to file you income tax returns.
Registering with income tax department is very easy.
To register your firm with income tax department, you to apply for PAN (Permanent Account Number).
You can apply for PAN online or offline. To apply for PAN offline you have to download application in form 49A.
Fill the application and attach your partnership deed or registration certificate as proof of existence of firm. You need to speed post the form to PAN processing center in Pune.
You can also apply online for PAN on NSDL website.
It is not compulsory to register your partnership firm with registrar.
However as a precautionary measure you should register your firm with registrar to avoid any mishap in future. For instance any contract gone wrong, you will not be in a position to sue your business partners.
In case of startups engaged in digital or E-commerce sector (includes every business on internet), liability can arise at any point of time.
What if your hosting company lost your data, if your partnership firm is not registered, you may not be able to sue them.
Thinking to establish a partnership firm in India? Then you must know how to register it to get all the benefits that a registered partnership firm gets in India. Stay tuned with us to know the registration procedure and list of documents required for registration.
What is a Partnership Firm Registration?
A partnership firm is a type of business structure that is formed with the mutual decision of two or more people who agree to share all the profits and shares of the firm. These types of firms are registered under the Indian Partnership Act. People are more indulged to form partnership companies due to their benefits like minimal compliances and ease of formation.
Is it Necessary to Get a Partnership Firm Registration in India?
It is not mandatory to register a partnership firm under the Indian Partnership Act. But we suggest you get it as it has various benefits for your firm which can protect you from future legal disputes.
One can have registration anytime- during the formation of the firm, before the formation of the firm.
So, if you want to enjoy all the special rights which aren’t available to the unregistered firms get your firm registered now, with the help of Enterslice.
What is the Procedure For Partnership Firm Registration?
As discussed, it is very easy to register a partnership firm. You just have to follow some easy steps to get the registration. Another way out is to take the help of Enterslice and sit back and let us do the rest of the work. So, here are the steps you need to follow to get the registration:
Step 1- Submit an Application to the Registrar:
You have to submit an application to the registrar of firms in prescribed Forma A. you can also do it online. The application must contain the following details:
- Name of the firm
- Name and address of all the respective partners
- The business address of main and all branches.
- Joining date of partners
- Duration of firm
- Date of Commencement of the respective business
Step 2- File the Partnership Deed to the Registrar:
Once you are done with the application, you need to file duly signed partnership deed copy with the registrar of office. It must contain all the terms and conditions.
Step 3: Pay the Fees:
You need to pay or deposit the required fees and stamp duties.
Step 4- Approval of the Application:
Once you are done with the submission of all the documents and necessary fees, registrar of office will approve your application and will issue a certificate of incorporation.
And this is how the procedure to register a partnership firm will be completed and your firm will attain legal recognition.
Documents Require for Partnership Firm Registration:
- Partnership deed signed by all the partners
- Pan card of all the respective partners
- Address proof of all the partners
- Pan card of the firm
- Address proof of the firm, in case the business place is rented you will require NOC from the landlord.
What is a Partnership Deed?
A partnership deed is a document signed by all the respective partners of the firm to avoid any future conflicts between the partners. It is signed on a judicial stamp paper and contains the following details:
- Name of the partnership firm
- Name of all the partners
- Nature of the business
- Date of commencement
- Capital contribution of all the partners
- Profit sharing ratio of all the partners
- Interest on contribution and the interest in drawings
- Guidelines for solving any disputes
- Terms and conditions of the retirement or expulsion of a partner
- Distribution of the l duties among the partners and many more.
This was all about how to register a partnership firm in India. If you want to know more about partnership firm, Leave Comment.
In India, partnership firm is a default choice when two or more people decided to start a business. In simpler terms, a partnership is an agreement between two or more persons to operate a business. These people who joined hands together by signing an agreement to form a partnership firm are known as partners.
A partnership firm is similar to a proprietorship form of business except instead of one owner or proprietor, there is more than one owner/partner.
Partners pull money towards a common purpose by forming a legal relationship. All the terms and conditions such as capital introduced by each partners, salary of partners, business objective, interest and profit sharing ratio and how and when partnership firm will be dissolved is mentioned in the agreement known as partnership deed signed by each partners.
You are not required to register your partnership firm. To get a legal proof of your firm’s existence, you can apply for registration with the Registrar of Firms.
How to create a partnership firm in India – step by step procedure
Before starting the process of creating a partnership firm, we suggest you to first decide on following important things;
- Profit and loss sharing ratio of each partners
- Business objective
- Registered and branch offices from where it will run its business.
- Total capital contribution and capital to be introduced by each partners
- Remuneration of each working partners
- Interest on capital to be paid, if any
- Admission, retirement and resignation of partners
After deciding on above points, creating a partnership firm is easy. You can even get started within a day. You need to follow below steps to create it;
Choose partnership firm name
You can choose any name based on your requirements. However, we suggest you to check trademark database to know if that name is already registered. In absence of trademark registration, you are free to use the name for your commercial purpose. To avoid future dispute, we suggest you to take trademark registration for your partnership firm name.
Avoid using all prohibited words and expression in your name.
Create a partnership deed
Partnership deed is the document which mention all the terms and conditions of forming a partnership firm. You need to specifically include name and address of the business and partners, business objective, when to commence business, duration, capital contribution, profit sharing ratio, remuneration of each partner and other important points. We suggest you to take help of a finance professional to draft it for you.
After drafting all the terms and conditions, take print out on a stamp paper in accordance to the Indian stamp act. The first page can be taken on the stamp paper and all others in A4 size paper. Each page including the last page has to be signed by each partners and two witness. Photo of all the partners are to be pasted on the front page by identifying each partner.
After preparing the deed, you need to get it notarized. Here is a list of questions that your deed or agreement must answer;
- Who is responsible for the day-to-day operation of the business?
- Who is liable for the debt of the business?
- How Profit/loss is distributed amount the owners/partners?
- How much salary will be paid to owners and how to derive it?
- What will be the interest on capital and how it will be paid?
- How new persons will be added or join the business?
- What business it will carry after signing the deed?
- What will be the firm’s registered office?
Apply for PAN
After preparing partnership deed, you need to apply for its permanent account number or PAN. You can use form 49B and submit it to any TIN FC along with a certified true copy of the deed. You can also apply PAN online by using net banking to pay the fee.
If you want your firm to be registered, then you can apply Registrar of Firm along with a certified true copy of the partnership deed, address proof and duly filled specimen of affidavit. If the registrar is satisfied, then your firm name will entered into the registrar of firms and you will be issued a certificate of registration.
After getting PAN and Certificate of registration, you can open a current account in the name of partnership firm and start operating your business.
For registration and drafting the deed, we suggest you to take help of a chartered accountant or advocate as certain terms and conditions in the deed may put you in trouble to claim tax deductions and in other legal matters.
In India, a partnership firm is taxed as a separate entity even though its not legally a separate entity. Each partner of the firm, report his or her share of profit, interest on capital and remuneration on his or her personal income tax return.
In certain professions including accounting, audit, law, architecture and consultancy services, businesses are commonly organized as partnerships.
In comparison to a company, proprietorship and partnership businesses are very easy and inexpensive to establish.Company formation and post incorporation compliance is very complicated and costly for a small business.However, if you wants your business to grow and attract investors to join in, then it’s worth investing money in a private or public limited company.
To summarize, here are the main disadvantages of a partnership firm;
- unlimited business liability of partners,
- limited life of the business,
- difficult to raise large amount of capital, and
- difficult to transfer business ownership
CA Bigyan Kumar Mishra is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.
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Partnership Firm Registration
What is Partnership Firm?
Partnership firm represents a business entity that is formed with a purpose of making a profit from the business. Two or more parties come together with a formal agreement (known as Partnership Deed) to own and manage the business. The risk and responsibilities are shared amongst the partners that shred the burden of an individual partner. Also, when two comes together, more capital and expertise are combined that helps to reach the business goal(s) easily.
Partnership Act, 1932 defines the structure of a Partnership firm by providing all the necessary provisions to run the same. The Act validates both registered and unregistered partnership firms in India. However, an unregistered partnership has few shortcomings that attract partners towards Partnership Firm Registration. But, one can overcome it by registration firm anytime after it is formed.
Benefits of Partnership Firm
The word Partnership itself describes individuals coming together for some common business object. The partners share the responsibility to work and manage the business together. Responsibilities for a particular field or task can be assigned to one or more partners by indicating the same in a Partnership Deed.
A Partnership firm is operated on the basis of the Partnership deed executed by the partners, mutually. The partners can decide how to operate the business with their mutual consent. Also, the Partnership Deed can be changed according to the requirement even after partnership deed registration is completed. There are no limitations or restrictions on the partners in regards to running the business, as long as it is covered under the signed agreement.
Pre-defined Object or Period
At the time of registering a Partnership firm, the deed enumerates the pre-defined business objectives and activities, which is the main aim to commence business. A partnership can be formed within a specified period or to complete a specific project or object. Once the same is completed, the partnership will automatically stand dissolved.
Various Financial Returns to the Partners
Partners involved with the firm get various types of returns for their capital as well as their individual efforts. The working partner also receives remuneration in addition to the interest on capital and share of profit, as may be agreed by the partners. Also, the share of profit from partnership firm is exempt for the partner receiving it.
In a partnership firm every partner is equally liable, jointly and severally for all or any of the other partners.
general partnership firm registration
A Partnership Firm registration is governed by ‘The Partnership Act 1932’ and involves two or more Individuals who enter into an agreement called “partnership deed” to hold on a specified business. Unregistered Partnerships involve no separate registration and may be formed easily with lesser legal compliance compared to other corporate entities. Although registration of a partnership firm is optional, the partners may choose the registration which provides a legal edge over the unregistered partnership.
TYPES OF PARTNERSHIP
There are two kinds 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 finalisation and execution of a Partnership Deed between the Partners. The Act doesn’t require the Partnership Deed/Partnership Firm to be registered and in other words, doesn’t require the Partnership Firm to be a registered Firm. Thus for the reason, various partnership businesses exist as an unregistered firm.
There aren’t any 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 consequences of non-registration of a partnership firm.
Some of the disadvantages of an unregistered firm are :
- Any partner of an unregistered firm is not authorized to 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 under the Partnership Act.
- No suit to enforce a right arising from an agreement is to be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered.
- An unregistered firm or any of its partners cannot claim set-off or other proceedings during a dispute with a 3rd party.
What is Partnership?
Let’s understand first what a partnership firm is? A partnership firm is a type of business where at least two individuals share ownership of the business. In this type of partnership, the partners share responsibility for managing the company and the revenue the business generates.
If we talk about the types of partnerships, there are three types of partnerships you can consider when you register a partnership firm:
A general partnership is an arrangement by which two or more persons agree to share in all assets, financial and profits and legal liabilities of a business.
In the limited partnership arrangement, the liability is limited to the total amount of their capital investment in the company. Limited Partners are also known as silent partners. In other words, they can make investments in the company but have no power to vote or control over business day to day operations.
Advantages of a limited partnership include:
- Personal asset protection
- Pass-through taxation
- Full oversight
- Investment potential
A joint venture partnership is a temporary partnership that two companies agree to gain mutual benefits by sharing costs, risks, and rewards.
Requirements to register partnership firm:
- There should be a minimum of 2 partners to register partnership firm in India.
- Few legal documents
- There is no minimum capital required to register partnership firm.
The following documents are required to register partnership firm in India:
– The statement in Form 1 with the prescribed fees.
– Notarised True copy of the Partnership Deed stating the following :
- The firm-name
- The nature of business of the firm
- The place of business of the firm
- The date when each partner joined the firm
- Full names and permanent addresses of the partners
- The duration of the firm
– Proof of ownership or rent of the location of your business. (e.g. Electricity Bill, Agreement of Business Place, etc)
– Copy of PAN Card of partners in a partnership
– Copy of Aadhaar Card or Voter identity card
These documents are required when someone register partnership firm in India.
Steps to register partnership firm in India
- First Choose Partnership Firm Name.
- Fillup the Application form with personal and business details.
- Create a Partnership Agreement or Deed.
- Take out the Print of the deed on stamp & get it signed by all the partners with notarization.
- Apply for the PAN & TAN.
- After receiving PAN Card hard copy, follow the next step.
- Apply for the MSME Registration.
- Open Current Bank Account
Benefits of registering a partnership firm in India
– Power to file a case in a Court by a partner against the firm.
– Power to file a case in Court by the firm against third parties.
– Power to claim set-off
When you complete the registration process for the partnership firm then you will need to register gst and if you have already registered and facing issue in filing the gst, you can learn by clicking on the link.
Partnership is a firm that comprised of two or more members who have decided to carry same business on an agreed manner. Here, partners supposed to share profit and loss and collectively responsible for any of the liability. The rules and regulations for partnership firm registration is controlled and maintained under Indian Partnership Act 1932. This form of corporate is one of the common and highly demanded in the Indian business market. With two or person you can start your business while getting registration as partnership firm. This form of company brings you with the simplest and easiest ways of carrying business without any risk of infringement.
The registering a partnership firm in India is being carried under the section 58 of the Indian Partnership Act by filing an application to Registrar office of company registration in the same state where the company’s head office is situated. There are several points that one needs to follow if one wants to apply for certificate of partnership firm registration. As in India a country with democratic corporate environment; it is mandatory to get register your company before commencing with any of the business tasks.
Registration Procedure for Partnership Firms in India
If the company is non-registered; then in case of any violation of acts by any of the third party or any other partner; the company could not claim or sue against the same. With registration; the company can reap the complete set of advantages in respect of legal rules.
A Partnership Firm is nothing but an organization of two or more people having a mutual understanding to run business and earn profit. Partnership firms are governed by the Indian Partnership Act, 1932 in India. Individuals are known are partners and collectively as a partnership firms.
Characteristics of Partnership Firm
Here are the characteristics of a Partnership Firm business:
- Number of Partners
- Voluntary Registration
- Contractual Relationship
- Competence of Partners
- Sharing of Profit and Loss
- Unlimited Liability
- Legal Status
- Transfer of Interest
- Principal – Agent Relationship
- No. of Partners: There must be 2 or more partners to start a partnership business. The maximum no. is restricted to 10 while doing business of banking and 20 in all other cases.
- Voluntary Registration: The registration of a partnership is optional however it is always advisable to register the firm as there are lots of other benefits persist.
- Contractual Relationship: There is a contractual relationship among all partners. The relation is governed through a Partnership Deed containing provisions on different aspects. The deed is signed by all the partners which bind each and every one of them.
- Competence of Partners: It has been provided under the Act that the partners entering into the Agreement must be competent they must not be minor.
- Sharing of Profit and Loss: The profit or losses are being shared by the partners in the ratio as agreed among them and written in the Agreement.
- Unlimited Liability: In all partnership firms which are governed through the aforesaid Act the liability of all partners is unlimited, they all combinedly liable for the losses being suffered by the firm.
- Transfer of Interest: The interest of the partners cannot be transferred without the consent of the other partners.
- Principal – Agent Relationship: There is a Principal Agent relationship among partners and firm. The agent act on the behalf of the firm and it is expected that he shall work in the best interest of the firm. The business may be carried out by the entire partner jointly or by any one of them acting on behalf of other partners.
What are the Advantages of Partnership Firm?
1. Easy Formation
2. Larger Resources
3. Flexibility in operation
4. Better Management
5. Sharing of Risk
- Easy Formation: The Registration of partnerships firm is optional and does not require any formality to be done, one can start the business as per mutual understanding. Hence, it is easy to form and very economical.
- Larger Resources: It is due to the reason that there are ample numbers of human resource, the partnership firm having larger resources for their business operations as compared to sole proprietorship firms.
- Flexibility in operation: Yes, the partnership firm has an advantage of flexibility. They can take decisions and can modify according to the dynamic environment easily.
- Better Management: It is only because of the ownership, control and profit. The business can be well managed.
- Sharing of Risk: As the loss is shared individually by all the partners.
- The interest of all partners is very well protected.
What are the Disadvantages of Partnership Firm?
2. Unlimited Liability
3. Lack of Harmony
4. Limited Capital
5. No legal status
1. Instability: This is one of the disadvantages of the partnership firm; like a Company is a going concern meaning that the Company cannot be dissolved with the death or retirement of any person. However, any death, insolvency may result in the dissolution of the partnership firm.
2. Unlimited Liability: Each and every partner of the partnership firm has unlimited liability. Whenever any dispute arises which results in great loss to the firm, then the personal property of the partners can be attached to compensate the loss being suffered by any party against the firm.
3. Lack of Harmony: As we know that the partnership firm is governed only through the Agreement, there can be cases where one partner may not agree with the opinion or decision of another partner which will ultimately result in mistrust and disharmony.
4. Limited Capital: It will be depending upon the financial state of partners, as the maximum no. is restricted only to 20 this is obvious that there will be limited capital in the hands of the partnership firm.
5. No legal status: the partnership firm has no legal status like other Private and Public limited companies.
How to register a Partnership firm?
It is easy to form a partnership firm in India. As the firm is not required to get registered the business can be started at any time without doing any legal formalities. On the other hand, if someone wants to create a partnership firm. Then an application can be filed under Section 58 of the Indian Partnership Act, 1932. The application is to be filed with the jurisdictional Registrar of Firm.
The Registrar of Firm after being satisfied will issue a certificate of registration to the firm.
What are the documents required to be filed for registration of partnership firm?
Following are the documents required for registration of partnership firm
- An application in appropriate form as required under the Act
- Identity and address proof of the partners
- Partnership deed
- Proof of registered premises
- Photos of partners
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Business partnerships play a vital role in the success of new ventures. They come with an extra managerial support – a blend of intellectual, monetary capital and skills. Stay alert with a few aspects of partnership firm registration in India prior to the process initiation. Maintaining partnerships is a task since factors like ego, money, disagreements can lead to a fallout.
Consider the following before you go for partnership registration
1. Do not rush in choosing a partner.
A lot of thought should go in choosing a right partner for your business. People with similar mind-sets, goals, and values usually create successful partnerships. Before you sign the partnership deed it is better to gauge your options. Networking is a great way to begin. It would help you to understand the other persons work methods and values.
Partnerships are dependent on two or more individuals working together for making profits in a business. If one of them disagrees with the other, it can harm the business. Hence, it’s best to choose your partner cautiously for a successful business arrangement.
2. Partnership Registration is highly recommended
Partnership registration is critical as the nature of partnerships is uncertain. All the clauses when spelt out create a sense of transparency. That is why it is recommended to create a balanced Partnership Agreement for partners.
Here are some of the benefits of partnership deed registration:
- Gives partners the ability to file a case against third parties, and other partners
- Grants the power to claim set-off against any third-party claim
- It’s easier and faster to convert into any other business structure if the partnership is registered
The following are the essentials of a balanced and a well-drafted deed:
- The name of the partnership: Preferably, it should be unique and original to have distinct recognition in the target audience/market
- Partners’ contribution: Can be in form of Property, Services, or Cash. Their valuation as well as what ownership percentages the partners would have
- Profit and loss allocation: Details about the divisions of profit and loss
- Partners’ Authority: It covers aspects of decision-making, specifying who shall have a final say. The deed should also include if any decision requires a majority vote or a unanimous consent
- Management duty: An ideal deed will include splitting-up duties amongst the members along with an individual’s responsibilities
- New partner admittance: Should include details on how to bring in new partners. Establishing a system will make it easy to take decisions for getting new people on board
- Partner withdrawal: A withdrawal process for a partner(s) by death or choice will prevent roadblocks in a partner’s absence. Creating a buyout scheme is advisable
Dispute resolution: Specifics about dispute resolution schemes must include ADR or court-order to handle disputes.
3. Look into LLP registration
Limited Liability Partnership is an ideal option to create a more secure structure than the general partnership. It keeps the liabilities among the partners limited.
LLP Registration offers the following benefits
- Liability protection: One partner would not be held liable for the actions of the other
- Tax Advantages: LLP gets extra benefits while other requirements remain the same as the general partnership
- A separate legal entity from the partners: Allowing an LLP to own assets in its own name
- Continuous existence: Exit or death of partners does not affect the LLP
- Increases the credibility: Raising funds from financial institutions becomes easy
Hence, the risk is less.
4. Be careful in deciding the capital distribution
Capital is the fuel that ensures the running of every business. One can make capital contributions at any stage of the partnership firm registration. It can be your resources, money, contacts etc. Giving all your capital can create differences and clashes. Moreover, sharing expenses by dividing duties makes dissolution simpler.
The clause should specify:
- Partners initial contribution to the firm
- Changes made in the capital amount
- If there is no contribution from any partner the deed should specify that too
The stamp duty amount is dependent on the capital invested during the registration.
The contribution can be made in various forms:
- In cash
- Tangible Assets, which can be machinery, land, inventory, building etc.
- Intangible Assets, these include intellectual properties, goodwill, customers etc.
The partnership agreement must include the asset valuation as contributed by each partner. This makes dissolution easier by dividing share between the partners. Along with the deed, books of accounts should have all this information.
An additional agreement is required in case of a change in total capital or in an individual partner’s investment it. And if the partnership deed is registered, the changes are to be notified to the RoF.
5. Organize an exit strategy
The partnership agreement should have a specific exit plan. It should define
- The procedure
- Details about the distribution of profits
- The firms’ dissolution strategy
An exit strategy should be such that it allows you or your partner to walk away from the partnership, or that provides options to buy out the other party. Voting rights are a must to avoid deadlocks, especially where it’s a 50/50 share partnership. Taking a third party on the board can help solve issues, as he can act like a tiebreaker.
These are some of the essentials one needs to be aware of before starting a partnership firm. These key points can help you make better decisions regarding the partnership firm and establish a successful business. Partnerships are great to start out with. But as one grows many other business structures can be opted for according to one’s requirements.
Architecture is the practice and product of design and construction of buildings and other physical structures for varied uses. The profession lies at the intersection of technical, social, environmental, aesthetic and functional domains. The current boom in the real estate sector is creating enormous demand in India wherein only 3000- 4500 architects graduate annually from 180 schools. With an estimated 40000 architecture professionals pan-India for a population of 1.2 billion, the demand is only set to grow. This demand makes the prospect of an architecture firm very lucrative for an entrepreneur.
Type of firm/services
To start, the entrepreneur has to focus on the kind of services his/her firm would be providing. Besides the enormous need for interior design, expansion and commercial building design, sustainable/ green building designs are also being sought after due to rising energy prices and government incentives. Concurrently, the size of the firm has to be decided upon. It could be a large or a small firm providing a range of services including landscape, interior design and engineering services, boutique design studio or a specialised firm for niche clients.
Networking is an essential factor to enable any business. A number of ways to make the work is visible occur on participating in national/international design competitions, publishing it in design magazines and attending design conclaves. Creating a website for the firm with samples of the work increases visibility which would lead to more interest/ inquiries from potential clients. Informal networking strategies are useful for private clients with small scale residential projects. However, government and institutional work mandates would require working on RFPs (Request For Proposals) and RFQs (Request For Qualifications) from which a certain number of candidates would be shortlisted. It is essential to get a steady stream of good quality work to keep up the interests of the firm.
The next step would be to get registered with the Council of Architecture (COA) after completion of a Bachelor of Architecture degree (B. Arch) from a recognised university to practice independently. Registration with the CoA entails requisite qualification as per the Architects Act after finishing the above-mentioned education in accordance with the CoA minimum standards regulations 1983. The candidate will get the Certificate of Registration on compliance of education standards which need to be renewed periodically. The registration certificate entitles the candidate to use the title of an architect and to provide architectural services. The candidate is also to observe professional conduct as stipulated in the Architects (Professional Conduct) Regulations, 1989 (as amended in 2003).
A Masters in Architecture degree is optional however, many organisers mandate a masters degree to participate in international design competitions. The employees working under the owner of the firm need not register with the CoA as the owner(s) will act as the signatory of the drawings.
Firm Registration- Sole Proprietorship or Partnership
Next step is registration of the firm. The firm may be registered as a sole proprietorship firm in case of a single promotor who will be responsible for the entire operations. However, if 2 or more decide to partner to start a firm, a partnership firm or limited liability partnership (LLP) can be started. In case of a partnership or LLP, all the partners need to be registered with the CoA. Public companies, private limited companies, societies and other juridical individuals are not allowed to practice architecture nor use the title of an architect as per the Architects Act.
Post by IndiaFilings.com
IndiaFilings is India’s largest online compliance services platform dedicated to helping people start and grow their business, at an affordable cost. We were started in 2014 with the mission of making it easier for Entrepreneurs to start their business. We have since helped start and operate tens of thousands of businesses by offering a range of business services. Our aim is to help the entrepreneur on the legal and regulatory requirements, and be a partner throughout the business lifecycle, offering support at every stage to ensure the business remains compliant and continually growing.