Partnership Firm Registration
A Partnership firm is a business entity created by persons who have agreed to share profits or loss of the business. Partnerships are a very good choice of business entity for small enterprises wherein two or more persons decides to contribute to a business and share the profits or losses. In India, Partnerships are widely prevalent because of its ease of formation and minimal regulatory compliance. Also, the concept of LLP was introduced only in 2010, whereas the Partnership Act, 1932 has been in existence before the independence of India. Hence, partnership firms are the most prevalent type of business entity wherein a group of people are involved.
A Partnership is one of the most important forms of a business organization, where two or more people come together to form a business and divide the profits thereof in an agreed ratio. A Partnership is easy to form, and the compliance is minimal as compared to companies.
Elements of Partnership
There are five essential elements of a partnership firm They are:
- Contract for Partnership
- Membership limited to 20 people
- Pursuit of business
- Sharing of profits
- Mutual agency in a partnership
Name given to the Partnership firm
Any name can be given to a partnership firm as long as you fulfill the below-mentioned conditions:
- The name shouldn’t be too similar or identical to an existing firm doing the same business,
- The name shouldn’t contain words like emperor, crown, empress, empire or any other words which show sanction or approval of the government.
How should be the agreement between partners formed?
Partnership deed is an agreement between the partners in which rights, duties, profits shares and other obligations of each partner is mentioned.
Partnership deed can be written or oral, although it is always advisable to write a partnership deed to avoid any conflicts in the future.
Following details are required in a partnership deed:
A. General Details:
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- Name and address of the firm and all the partners
- Nature of business
- Date of starting of business Capital to be contributed by each partner
- Capital to be contributed by each partner
- Profit/loss sharing ratio among the partners
B. Specific Details:
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- Apart from these, certain specific clauses may also be mentioned to avoid any conflict at a later stage:
- Interest on capital invested, drawings by partners or any loans provided by partners to firm
- Salaries, commissions or any other amount to be payable to partners
- Rights of each partner, including additional rights to be enjoyed by the active partners
- Duties and obligations of all partners
- Adjustments or processes to be followed on account of retirement or death of a partner or dissolution of firm.
- Other clauses as partners may decide by mutual discussion
FAQ
Is it necessary to register a partnership firm?
Indian Partnership Act, 1932 governs the partnerships. Registration of partnership firm is optional and at the discretion of the partners.
Registration of partnership firm may be done at any time – before starting a business or anytime during the continuation of partnership.
It is always advisable to register the firm since a registered firms enjoy special rights which aren’t available to the unregistered firms.
How to register the partnership firm?
An application form along with fees is to be submitted to Registrar of Firms of the State in which firm is situated. The application has to be signed by all partners or their agents.
Documents to be submitted to Registrar are
Application for registration of partnership (Form 1) Specimen of Affidavit Certified original copy of Partnership Deed Proof of principal place of business (ownership documents or rental/lease agreement)If the registrar is satisfied with the documents, he will register the firm in Register of Firms and issue Certificate of Registration.
Register of Firms contains up-to-date information on all firms and can be viewed by anybody upon payment of certain fees.
How much time does it take to register a partnership?
The registration of Partnership Firm in India can take up to 12 to 14 working days. However, the time taken to issue a certificate of incorporation may vary as per the regulations of the concerned state. The registration of Partnership Firm is subject to Government processing time which varies for each State.
Are there any grounds on which my partnership can be invalid?
Often, if the partnership agreement is not registered, the court may deem a partnership invalid. If the object of the business is illegal, the court may consider the partnership invalid and dissolve the partnership.
If all partners wish to end the partnership, how can they do so?
If the partners of a firm wish to end the partnership, they can do so by dissolving the partnership by notice, if it is a partnership of will. A partnership can be dissolved in accordance with the terms laid out in the Partnership Deed, or they can do so creating a separate agreement.
Can my certificate of registration be cancelled?
In a certain sense, a partnership certification of incorporation can be revoked, this often termed as dissolution. A dissolution can be brought upon automatically when all partners or all partners except one partner are declared insolvent or if the firm is carrying unlawful activities, i.e. like trading in drugs or other illegal products, corporate malpractice or making business engagements with countries that may harm the interest of India.
What is the scope of liability when it comes to partnerships?
What is Partnership Deed ?
A partnership deed is a written agreement made between two or more partners who are willing to undertake business together. The deed consists of all the terms and conditions that are made in agreement with the partners. A partnership deed must contain the following:
Capital contribution The ratio of the profit to be shared Details of partners Nature of business Working of the firm Dissolution or liquidation of the firmRequired Documents for Partnership Firm
It is mandatory to possess the following documents while registering a partnership firm in Maharashtra:
Certified copy of partnership deed Certified copy of Marathi Translation Partnership Deed Rs.10 blank stamp paper An authority letter signed by firm partners Covering letter with Rs.5 court fee stamp Demand Draft of Rs.1,600