Partnership Firm Registration
Partnership Firm Registration, Easily and Fast with VenueTax | Kolhapur
Partnership Firm Registration
A Partnership is a business structure in which two or more individuals manage and operate a business in accordance with the terms and goals set out in the Partnership Deed. Partnership registration is relatively easy and is prevalent among small and medium sized businesses in the unorganized sectors. 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.
There are two types of Partnership firms, registered and unregistered Partnership firm. It is not compulsory to register a Partnership firm; however, it is advisable to register a Partnership firm due to the added advantages. Partnership firms are created by drafting a Partnership deed among the Partners and VenueTax | Kolhapur can help start a registered or unregistered Partnership firm in Kolhpaur.
Under section 44(d) of the Act, a suit can be filed against the managing partner for dissolution of the partnership firm.
THE INDIAN PARTNERSHIP ACT’ 1932 Section.4 of the Indian Partnership Act, 1932 defines Partnership in the following terms: “ Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”
“Section 464 of the Companies Act, 2013 empowers the Centre Government to prescribe maximum number of partners in a firm but the number of partners so prescribed cannot be more than 100.The Central Government has prescribed maximum number of partners in a firm to be 50 vide Rule 10 of the Companies (Miscellaneous) Rules,2014.Thus, in effect, a partnership firm cannot have more than 50 members”.
Somethings to Know: Partnership Registration
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.
Cannot claim Setoff in a dispute with a third party.
The firm cannot sue third parties whereas the third parties would be able to sue the firm irrespective of registration.
1.Easy Formation It was very easy to form any partnership firm. Like LLP and other corporate business, it does not require much legal formality during incorporation of partnership firm. It is not necessary to get the firm registered. To start a partnership firm, you need to do a deed that can be oral or written. There are few states of India which makes mandatory for registration of Partnership Firm. In some states registration is not required; you have to only do a partnership Deed.
2.Larger Resources Due to the more number of members, the partnership firm has larger resources for the business operations as compared to the sole proprietorship. As there are multiple partners in a partnership firm, they can use their knowledge and experience to expand their partnership business.
3.Sharing of Risk One of the most significant advantages of the partnership firm is that the risk gets equalized in all the partners. As there are multiple partners in a partnership, so the risk gets balanced.
4.No Annual Returns There is no need to submit an annual return to the Ministry of Corporate Affairs. If we compare partnership firm with Limited Liability Partnership, then we do not have to file an annual return in the Partnership firm to the ministry of Corporate Affairs, while we have to fulfill many compliance in the Limited Liability Partnership.
5.Higher Contribution of Capital A partnership firm can raise the higher contribution of capital because of its higher number of partners. It can raise contribution easily because there are multiple partners available for donation. Multiple partners can also get various loans from the bank so it will help you in many ways.
6.No Statuary Audit One of the significant advantages of a Partnership firm is, there is no requirement of Statuary Audit. Therefore a Partnership Firm is not required to get its books of account audited. You may have to check your book of mind if there is any requirement of Income Tax Act. Sometimes it is required by the Income Tax Department.
7.Winding Up In a partnership firm, it is very simple to winding up of Partnership Firm. Partners of Partnership Firm can enter into a dissolution deed anytime, or they can also make a clause of winding up in Partnership deed so it will wind up accordingly. In a partnership firm, there is a decidedly less legal process for winding up.
8.Flexibility in Operation One of the benefits of the Partnership firm is that it is a bit flexible because you do not have to complete much legal formality until it is completed from its beginning. Operation of Partnership would be very flexible as the partner can increase or decrease the area of their business without any legal formality. The owners of the partnership firm are partners, so it is easy for them to take any decision. Decision making in partnership is easy as compared to other corporate entity.
9.Can File a Case Against The 3rd Party A Partnership firm can bring third parties to the court for resolution of disputes arose during business and in fact of any other matter relating to the partnership firm. An unregistered Partnership firm loses the right file the case against the third party for resolution of their disputes until and unless the procedure of Deed Registration has been completed. 3rd party can also sue the Partnership firm.
Conclusion As you can see that Partnership firm can be incorporate by minimum two people by partnership deep and it has many benefits. As some of the interest is mentioned above. If you are planning a startup, then you should consider a partnership firm because its incorporation is very easy and it has less legal requirement so it will give benefit to you. From its incorporation to its winding up, all process of partnership firm is easy and simple. You must give it a thought.
1. Limited Capital : In the partnership firm, there is a restriction on the members of the partnership, therefore, the total amount of capital which can be invested in case of the partnership is limited to the sum total of the individual amount invested by each partner. It is not attainable for the Partnership firm to collect huge capital.
2.Unlimited Liability: The liability of each partner is joint and several. The firm cannot conduct any large business activity. This is because, if the assets of partners are insufficient to pay off the debts, then the personal property of partners is taken over by the creditors.
3. Instability: The continuity of the firm is always doubtful because it comes to end by the death, insolvency or insanity of any of the partner, or a partner may even dissolve the partnership by giving 14 days notice.
4. Restriction on Transfer ability of Interest: A partner cannot transfer his partnership interest to an outsider without the consent of all partners. A partner is also not authorized to bring any new partner without the consent of another partner. This shows that there is a restriction on transfer of interest.
5.No Public Confidence: The registration of the firm is not compulsory. There is the absence of government control further the firm needs not publish its accounts. Due to this, the firm cannot get the confidence of the public
6. The absence of Separate Legal Status: A firm is not an artificial person like Joint Stock Company. It is not recognized by the law as a person. The existence of the firm is related to the partners. The insolvency of the partner is the insolvency of the partnership.
7. The absence of Central Authority: All partners are joint owners, they have full right to the management. There is no different authority to control the different partners. Therefore, it is difficult to bring them together.
8. Conflicts and Disputes : Unity among the partners is essential for the success of the partnership. But the unity among the partners cannot be secured. When the number of partner increases, differences of opinion and disputes tend to arise and disturbs the smooth working of the business.
9. Restricted Number of Partners : As the number of partners are restricted to 10 in the case of banking business and to 20 in the case of any other business. The capital that can be collected by a partnership is limited
10. Risk of Implied Authority : Each partner is considered an agent of the Partnership Firm. He can confine the co-partners by his activities. On account of this authority of the partner, honest partners have to suffer for the absurd, careless or untruthful actions of immoral partners.
11. Lack of Continuity : A partnership firm has a shortcoming in regards to the continuity because of death of the partner, insolvency, insanity or retirement of a partner, firm may come to end as time period expires or purpose for which it was formed is completed and if the court orders the partnership firm to dissolve its Business.
12. Absence of Legal Status: The Indian Partnership Act, 1932, does not give independent legal status to the partnership. As registration is not mandatory except in certain states, no differentiation is made between a partnership firm and its partners.
The Partnership is a popular form of Business entity in India, It most commonly opened the business in India. If you are opening a new business in India and thinking of registering a partnership firm Then you must consider above disadvantages and then if you can manage these disadvantages or can find a way to work through these disadvantages open a partnership Business. Apart from them, you can also choose the option of choosing LLP, STARTUP, OPC and Private limited company etc.
Registration of Partnership Firm
The members of a partnership Firm may enter into a written contractual agreement, but such formality is not necessary. Generally, to determine whether a partnership existed, a court will ask whether there was a sharing of profits and losses, joint administration and control of the business, a capital investment by each partner, and common ownership of property. The court will also examine the intent of the parties. Partnerships are governed almost exclusively by state law—tax concerns and jurisdictional issues are the only notable exceptions. VenueTax will assist you to get registered under the law.
Yes, Partnership Firm Registration is a fully online process. As all documents are filed electronically, you would not need to be physically present at all. You would need to send us scanned copies of all the required documents & forms.
A partnership firm is a business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Deed that may or may not be registered. In such a business, the members are individually partners and share the liabilities as well as profits of the firm in a predetermined ratio.
A partnership firm is best for small businesses that plan to remain small. Low costs, ease of setting up and minimal compliance requirements make it a sensible option for such businesses. Registration is optional for General Partnerships. It is governed by Section 4 of the Partnership Act, 1932. For larger businesses, it has lost its relevance with the introduction of the Limited Liability Partnership (LLP). This is because an LLP retains the low costs of a partnership while providing the benefit of unlimited liability, which means that partners are not personally liable for the debts of the business.
The partners in a partnership firm are the owners, and thus, are not separate entity from the firm. Any legal issues or debt incurred by the firm is the responsibility of its owners, the partners.
A partnership must have at least two partners. A partnership firm in the banking business can have up to 10 partners, while those engaged in any other business can have 20 partners. These partners can divide profits and losses equally or unequally.
No, registration of a partnership is not necessary. However, for a partner to sue another partner or the firm itself, the partnership should be registered. Moreover, for the partnership to bring any suit to court, the firm should be registered. For this reason, it is recommended that larger businesses register the partnership deed.
A partnership firm can be registered whether at the time of its formation or even subsequently. The application for registration is to be made to the registrar of firms of the region in which the business is situated. It is advisable to get the firm registered as soon as it starts its business to avail the rights that can be enjoyed only by a registered firm.
The deed should contain names of the partners and their addresses, the partnership name, the date of commencement of operation of the firm, any capital invested by each partner, the type of partnership and profit-sharing matrix, rules and regulations to be followed for intake of partners or removal.
The name of a partnership firm should not contain any words which indicate the approval/support of the government other than a case where the government has given its written consent for the use of such words as part of the firm’s name. Key pointers:
- The names must not be too identical or similar to the name of another existing firm doing similar business.
- The name must not contain words like Crown, Emperor, Empress, Empire or any other word indicating government approval.
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