COMPLETE PROCESS OF REGISTRATION OF PARTNERSHIP FIRM
| DOCUMENTS| PROCESS| REQUIREMENTS

INTRODUCTION

A partnership firm is one of the most popular forms of business conducted in the present times. In a partnership firm, two or more individuals called partners combine together for the attainment of the Partnership Firm’s objectives and to share the profits or losses among them. The Indian Partnership Firm is governed by the guiding principles of The Indian Partnership Act, 1932, which was published in official gazette on October 1, 1932, except Section 69, dealing with registration of partnership. 

The concept of association, i.e., the partnership, was first introduced under the Indian Contract Act, 1872, whose chapter 11, Section 239-66, stated the need of partnership firms in accordance with the usage and customs of Indian traders and businessmen. With the introduction of the Indian Partnership Act, 1932, the above-stated Section 239-66 were repealed and are now based upon the English Partnership Act, 1890. 

DEFINITION

Section 4 of Indian Partnership Act, 1932, defines partnership as-

“It is a relation between 2 or more persons or partners who have agreed to share profits of the business which is carried on by all or any of them acting for all”.

This agreement between partners can be written or oral as observed under the landmark case of Niadar Mal Jagdish Prashad vs. Commissioner of Income Tax.

A partnership firm is a relationship where there is no separation of ownership and control as their individuals have to act in the confidence of each other, and an act of one partner is binding on the other. The partners have specified joint liabilities and duties which are obligatory to them. The partners of a firm are the real owners, and there, the firm does not have a separate legal identity of its own, as observed in Malabar fisheries co. vs. I.T commissioner, Kerala.

For more information, please contact us on info@trijuris.com or call us Mb. No. 85100 58386 or 9310 717274.

FEATURES OF A PARTNERSHIP FIRM

1. MINIMUM TWO INDIVIDUALS: At least two people are needed to become accomplices of the firm. In any case, the most extreme ‘Twenty Partners’ are permitted in a firm (10 in financial/banking business). The partners should meet up to continue any legitimate business with the rationale of acquiring benefits. 

2. CAPACITY: The parties should be capable enough to enter into a partnership, i.e., they must be a major individual (18 years old and above) and not minor. He must be of sound mind or must not have been barred by the law itself from entering into a partnership. 

3. LAWFUL BUSINESS: The accomplices or partners can take up just legitimately recognized activi­ties. Any illicit act done by accomplices despises lawful authorization.

4. REGISTRATION: Under the Act, enlistment of a firm isn’t obligatory. (In many states in India, enlistment is intentional). Nonetheless, if the firm isn’t enrolled, certain legitimate advantages can’t be acquired. The impacts of non-enlistment are-(I) the firm can’t make any move in an official courtroom against some other gatherings for settlement of cases, and (ii) in the event of a debate among accomplices, it is unimaginable to expect to settle the questions through an official courtroom.

5. UNLIMITED LIABILITY: All partners are collectively and severally liable for all undertakings completed by the organization. As such, in all situations where the resources of the firm are not adequate to meet the commitments of creditors of the firm, the private resources of the partner can likewise be appended. The leasers can get a hold on anyone partner- who is fi­nancially solid and get their cases fulfilled.

6. LEGAL ENTITY: The firm doesn’t have its very own separate legal entity. The business gets ended in the event of death, bankruptcy, or lunacy of any of the accomplices.

ADVANTAGES OF A PARTNERSHIP FIRM

1. EFFORTLESS START: No complicated process is involved to incorporate a partnership. The only requirement for starting a partnership firm in most cases is a partnership deed.

2. QUICK DECISIONS: Decision-making is the essence of any association. Decisions in a partnership firm could be quicker as there is the theory of passing of resolutions. The accomplices in an association firm appreciate a wide sphere of influence in the firm and, as a rule, can embrace any exchange for the organization’s firm without the assent of different accomplices.

3. NO MINIMUM CAPITAL: No base capital is required; it should be founded on the business pre-requisites. The Stamp Duty is required to be paid on the deed depends on the capital of the firm. Notwithstanding, the organizations comprised with a capital of upto 2,000 rupees are not qualified to guarantee a set-off or different procedures to implement a privilege emerging from the association.

4. SENSE OF POSSESSION: Each partner possesses and deals with the exercises of their firm. Their assignments may be changed in nature. However, individuals in an organization firm are joined for a typical reason. Ownership creates a higher feeling of responsibility, which prepares for a tireless labor force.

5. FUNDRAISING: When contrasted with a proprietorship firm, a partnership firm can, without much of a stretch, raise reserves. Multiple partners make for more possible commitment among the accomplices. Additionally, banks likewise see an organization all the better while endorsing credit offices rather than a proprietorship firm.

 DISADVANTAGES OF A PARTNERSHIP FIRM

1. UNLIMITED LIABILITY: Each partner is responsible by and by for the misfortunes of a partnership firm. The acts performed by a partner in the organization firm will likewise make each one of the partners actually at risk. To restrict the responsibility of partners in a partnership firm, the LLP structure was made by the Government.

2. LACKS CENTRAL AUTHORITY: Leadership can shoot up or crash a firm. Combined possession removes the chance of unidirectional leadership, and the absence of a central authority prompts aimless activities.

3. RESTRICTIONS ON FIRM NAME: The name of the firm should be unique and different, and it should not be the same or similar to the name of any existing firm which is registered or applied.

4. SECTION 69: It places certain restrictions on unregistered firms, like ;

  • Only registered firms can claim a set-off.
  • An unregistered partnership cannot recover any sum due from a third party if the amount is more than Rs. 100/-. 
  • Partners cannot file suit against another partner or the firm. 

In the infamous case of Pradhan Traders v Balaji Provision Stores, the Honourable High Court dismissed the petition under section 69(2) as the plaintiff was not a registered firm. 

5. ABRUPT DISSOLUTION: A partnership firm would break down because of the demise or bankruptcy of a partner. A particularly unexpected disintegration will hamper a business. Then again, the demise of a partner won’t naturally disintegrate an LLP. Thus, congruity of business is kept up in an LLP.

For more information, please contact us on info@trijuris.com or call us Mb. No. 85100 58386 or 9310 717274.

REGISTRATION OF PARTNERSHIP FIRM

1. SELECT A NAME: Select any name according to the wish of the partners. Anyway the chosen name: 

It ought not to be excessively indistinguishable or like the name of the generally enlisted firm. The name ought not to utilize words like the Crown, Emperor, Empire, and so forth.

2. PREPARE AN AGREEMENT: The subsequent stage is to make an organization deed. The terms and conditions to be noted in an arrangement are according to the attentiveness of partners. Additionally, it is on the partner to get it down orally or composed. The anyway written deed is prudent in the event of future struggle emerge. 

Written agreements must contain the following:- 

  • Full details of partners
  • Name & complete address of the company
  • Nature of business to be conducted
  • Date of entering into business
  • Duration of partnership 
  • Capital contribution
  • Management 
  • Voting 
  • Profit & loss sharing ratio
  • Tax implications 
  • Withdrawal
  • Dissolution

3. SUBMIT APPLICATION FORM: The following stage is to make a partnership deed. The terms and conditions to be noted in an arrangement are according to the tact of accomplices; likewise, it is on the partner to get it down orally or composed. Anyway, a composed deed is fitting to avoid an occurrence of future clash emerges. 

  • Form-1 for applying for registration.
  • Duly filled specimen of an affidavit.
  • Certified original partnership deed.
  • Address proof of the partnership firm.

4. CERTIFICATE OF REGISTRATION: In the event that the registrar confirms an application subsequent to investigating an application and every one of the archives, he will enlist the firm and issue a Certificate of Registration.

DOCUMENTS REQUIRED FOR A PARTNERSHIP FIRM

  • PARTNERSHIP DEED: Though a partnership deed can be oral, but it is advisable to keep the partnership deed in writing to keep away from any future struggle. A partnership deed is made on a legal stamp paper acquired from the individual State Registrar Office and must be endorsed by every one of the accomplices. It contains the rights and obligations of the firm and the partners.
  • DOCUMENTS OF THE PARTNERSHIP FIRM: The PAN of the firm shall be applied by the partners. In the event that the enrolled office place is leased or rented, a rent agreement and one utility charge bill (power charge, water charge, local charge, gas receipt, and so on) must be submitted. Additionally, NOC from the property owner will be submitted. In the event that the enlisted office place is own, a service utility bill must be submitted referencing the name of the proprietor. Likewise, a NOC from the (proprietor as referenced in the service bill) must be submitted.
  • DOCUMENTS OF THE PARTNERS: The partners need to submit partnership deed, ID and address evidence of the firm, and documents of partners are necessary to the Registrar of Firms. With it, an affidavit is additionally needed to be submitted, ensuring that every one of the subtleties referenced indeed and records are right.
  • GST REGISTRATION: For getting a GST enrolment, a firm is required to submit a PAN number, address confirmation, and character and address verifications of the partners. The approved signatory will sign the application either utilizing a computerized signature declaration or E-Aadhar confirmation.
  • CURRENT BANK ACCOUNT: Partners need to open a partnership firm’s current bank account. The bank account will be opened after submission of various documents of the partners and firm such as partnership deed, ID of all partners, address proof of the firm, copy of electricity bill, etc.

PARTNERSHIP DEED

Basically, a “Partnership Deed” is a written document wherein the duties and rights of the partners are written. This deed is created to avoid any kind of disputes, harassment to the partners regarding any issue. The partnership deed is not mandatory for the partners, but this is done for the smooth operations of the partnership firm. The unregistered partnership firm cannot be considered as valid in view of Section 9 of the Partnership Act, 1932.

For more information, please contact us on info@trijuris.com or call us Mb. No. 85100 58386 or 9310 717274.

CONCLUSION

From above, it has been observed that a partnership firm is easy to run and register. Although it has many cons, the overall concept of a partnership firm is pushing the idea of doing business at a collective stage where individuals combine for the attainment of profits through the partnership firm. 

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