Partnership- A very simple yet strong word. Partnership firm registration is done on many bases. It may be on a friendly basis or it can be formal. Partnership in the Corporate world refers to a relationship when two or more people decide to share the profits of a business carried on by them all or any of them acting for all. It’s generally done in legal terms. The percentage of ownership varies and depends on certain factors. Partnership firm thus is a firm which allows joint ownership of a business. There are certain rules and regulations that have to be followed while setting up a Partnership firm. Registering a partnership firm is not compulsory under the Indian Partnership Act, 1932 but only Maharashtra has made their registration compulsory. Further, a partnership firm can be registered at any point in time i.e. even several years after formation. Registering or not registering a partnership firm has its own advantages, but like a coin which has two faces, it definitely has its own disadvantages too. Described below in detail is how a partnership firm works and how can you register for partnership firm in India.
The partnership is relatively easy to start however, there are certain conditions and restrictions to be followed in setting them up. Also, according to Indian Partnership Act,1932, consent of all the partners in a partnership firm is required in fundamental matters (like admission of new partners, dissolution of the firm, conversion of the firm etc.) and a majority in other matters and there should be sharing of all the profits or losses made in the business. It also states that there has to be a legal contract that There are certainly more rules while setting up a Partnership firm, clearly stated in the Indian Partnership Act,1932 and they should be followed strictly to avoid any severe actions made by authorities towards your firm.
For Partnership Registration, you must agree on a firm name and then establish a partnership deed. It is a document stating respective rights and obligations of the partners and to be valid it should be written and not oral. The terms of the Partnership Deed can be varied to suit the interests of the partners and can even be made contrary to the Indian Partnership Act, 1932 but if the Partnership Deed is silent on any point, then the provisions of the Act would apply. The registration of the partnership firm is optional according to the Indian Partnership Act,1932, however, unregistered partnership firms cannot enjoy the benefits of the Indian Partnership Act, 1932. They are:
(a) Partner Cannot sue firm: A partner in an unregistered partnership firm cannot sue the firm for enforcing any rights under the Indian Partnership Act, 1932.
(b) Cannot claim Setoff in a dispute with a third party.
(c) The firm cannot sue third parties whereas the third parties would be able to sue the firm irrespective of registration.
The following documents are required for the registration of a Partnership firm:
(a) Statement in Form 1 with the prescribed fees
(b) A notarized True copy of the Partnership Deed stating the following:
- the firm-name,
- the nature of business of the firm;
- the place or principal place of business of the firm,
- the names of any other places where the firm carries on business,
- the date when each partner joined the firm,
- the names in full and permanent addresses of the partners, and
- the duration of the firm.
(c) Proof of ownership or rent/lease of the location of your business.
The Statement must be signed by all the partners of the firm. It must also be verified by affidavit in the prescribed manner.
All this must be submitted to the Registrar of the firms of the state. A certificate of Registration is then issued, by the Registrar, and a copy should be given to all the partners. Also, a separate registration with the Income Tax department is to be done in order to avoid any future problems and must obtain a PAN card and a bank account under the name of Partnership firm and a bank account.