A partnership firm requires a minimum of two people who agree to manage a business based on the terms and conditions they have mutually set in a Partnership deed for a profitable purpose. The partnership firm is operated and owned by a set of individuals known as partners who have shared capital in the firm.
The partnership firm can be registered or non-registered as partnership firm registration in India is not compulsory, but a firm can have advantages if it is registered under the Partnership Act, 1932. Partnership firm registration in India is not a very complex process as it needs very few documents and formalities to be completed.
What is a Partnership Firm Registration in India?
A partnership firm is formed when a minimum of two people come together to indulge in business activities. Partnership firm registration in India is done under section 58 of the Partnership Act. The main objective of these types of firms is to earn profits. Individuals involved in the firm are called partners who share profits and losses in the proportion of their respective owners.
A partnership firm is necessary before the commencement of the business. The decisions made in a partnership firm are made with the mutual understanding of all the firm's partners.
Benefits of Partnership Firm Registration in India
Easy Business Structure
A partnership firm is an easy business structure process as compared to other businesses. A firm can be started by drafting a partnership deed for which a partnership firm registration is required. There is minimal documentation required for partnership firm registration in comparison to other organizations.
Easier Decision Making
Partnership firms do not have to pass resolution every time they make a decision like other business organizations. A partner can make a decision to perform a transaction on behalf of the other partners of the firm.
Raising Funds
In comparison to other business organizations, funds in a partnership firm can be raised easily as they have multiple partners who can make a feasible contribution to the firm's capital, and banking institutions favor a partnership firm while considering loans.
Easy Management
All the partnership firm partners have already been assigned their duties and functions that they have to perform in the Partnership deed. This helps in evading any struggles between the partners.
Documents Required for Partnership Firm Registration in India
Partnership Deed
A partnership deed is a legal document of an agreement between two or more partners defining the partners' rules, duties, procedures, shares, and function. A partnership deed also specifies various aspects of a partnership firm: profit and loss sharing ratio, salaries, interest on capital, drawings, guidelines for adding a new partner, etc. The main reason a partnership deed is drafted is to avoid any conflict between the partners. A partnership deed is signed by all the partners on judicial stamp paper that coasts around INR 2000.
PAN Card
All the partnership firm's proposed partners need to submit a verified copy of their PAN card as Identity Proof.
Address Proof
All the designated partners have to submit a verified copy of their address proof. Address proof can be given by submitting any utility bill if it has the same name as mentioned in the PAN card or partners can provide Aadhar card, voter ID card, driving license, ration card, etc. the details provided in the address proof document must match the details mentioned in the PAN card.
Office Address Proof
Address proof of the registered office of the partnership firm must be submitted. If the premise where the office is registered is on rent, then a verified copy of the rent agreement and No Objection Certificate (NOC) from the landlord along with utility bills like electricity bill, telephone bill, property tax receipt, etc.
If the registered office is on a premise owned by any of the firm's partners then a utility bill in the name of the partner and No Objection Certificate (NOC).
The procedure of Partnership Firm Registration in India
Selection of Name
The applicant firm has to choose a name for the partnership firm registration. The name selected must be a unique name; it should not be similar to any other company or firm's name. A name must not include any words like an empire, crown, empress, or other words not permitted by the government.
Filing of Application
After the name selection, the next step is to file an application in form 1 of partnership firm registration. The applicant must submit the application to the Registrar of the Firms of the respective state where the partnership firm is located. The applicant has to file an application in the prescribed format and submit the fee, as mentioned in the Act.
Partnership Deed
Partnership deed must be drafted with the consent of every partner on a judicial stamp paper. Components of Partnership deed are mentioned below:
Details of partnership firm and partners like name, address qualification, etc.
Details about the partnership firm activities
Contribution of capital made by all the partners of the firm
Interest or shares of all the partners of the firm
Profit and loss sharing ratio
Duties, salaries, rights, commissions, or any other payable amount to the partners
If any loan is provided by the partners to the firms, then the details of such loans.
A process under the circumstances of death or retirement of a designated partner.
If any other clauses are added, or any changes in the clauses are made, they must be done with the mutual consent of the partners.
Document submission
The applicant firm has to submit all the documents, including the partnership deed. The concerning authorities will verify the documents and information provided.
Issuance of Registration Certificate
After the documents and information provided by the applicant, the firm are verified, and everything is as per the provision of the Partnership Act, then the authorities will grant a certificate, and the partnership firm registration is completed.
Conclusion
Partnership firm registration in India is done under section 58 of the Partnership Act. The main objective of these types of firms is to earn profits. Individuals involved in the firm are called partners who share profits and losses in the proportion of their respective owners. Partnership firm registration in India is not a complex process as it needs very fewer documents and formalities to be completed