The partnership firm is one of the vital business forms in India. Partnership firms are governed by the Indian Partnership Act of 1932. Partnership Firm Registration is not necessarily done before commencing a business in a partnership but anytime during the continuance of a business it just needs a partnership deed. As stated under the provisions of the Indian Partnership Act, 1932 registration of a partnership is not necessary but to avail certain benefits and avoid conflicts and disagreements between the partners' partnership firm registration should be done.
Partnership Firm Registration
A coalition of two or more peoples that come to a decision to do a business together with the intention of earning profit is considered as a partnership firm. Members of such coalition are recognized as partners. The business is owned, controlled and managed by the partners. The partners in a partnership firm share profit and loss as per their respective shares in the ownership. The benefit of a partnership firm is that it can be started with a huge capital as each partner can contribute as per their convenience, and a load of raising capital for the firm will be shared. The process making decisions in a partnership is a collective and mutual; consent of every partner involved in the firm is required before reaching to a conclusion.
Partnership firms are distinguished as registered and non-registered firms. It is not obligatory to obtain registration for a partnership firm, as stated under the provisions of the Indian Partnership Act but it is highly advisable to get registration under the Indian Partnership Act, as partnership firm registration offers a range of benefits and provides security to a business.
Advantages of Partnership Firm Registration
Easy Business Structure
A partnership firm has the easiest business structure as compared to other business forms as it can be formed by only drafting a partnership deed. A partnership deed is considered the most essential document for partnership firm registration.
Easy Decision Making
In a partnership firm, decision making is simple and faster as the partners do not have to follow any regulations for passing a resolution for every decision they make. In a partnership firm partners mutually make decisions. If it is essential for the firm, a partner can also carry out a business transaction on behalf of the firm without taking other partners into consideration.
Ease in Raising Funds
If compared to another business form such as proprietorship, a partnership firm can raise funds easily. As the pressure of raising funds is not on a single person but it is shared between the partners and each partner can contribute as per their capacity. Financial institutions and Banks are more favourable to partnership firms than other forms of business while considering loans.
Easy Management
In a partnership firm duties and responsibilities are assigned as per the competency of the partners 0r as stated in the partnership deed. In a partnership deed partners mutually decide the clauses they have to follow. This helps in avoiding conflicts maintains transparency between the partners.
Documents Required for Partnership Firm Registration.
Partnership Deed
A partnership deed is the most significant document required for partnership firm registration. A partnership deed has clauses regarding rules, methodology, duties, functions, and the profit and loss sharing ratio is also determined in the partnership deed by the partners. It also helps in avoiding future conflicts between the partners’ as duties and responsibilities are mutually decided in a partnership deed. A partnership deed is drafted on a judicial stamp paper that costs INR 2000 and it must be signed by all the proposed partners.
PAN Card
For ID proof, all the proposed partners of the firm must provide a certified copy of their PAN card.
Address Proof
The proposed partners of the firm must provide a copy of address proof of their current address. The partners can provide any government-approved document such as Aadhar card, driving license, voter ID card, ration card, etc. as address proof.
Registered Office Address Proof
The applicant has to provide Address proof of the office of the firm. Address proof for the office can be any utility bill such as water bill, gas bill, telephone bill, property tax bill or electricity bill. The submitted address proof should be latest. (not older than two months).
In case if the firms’ office is on rented premise than the rental agreement and NOC from the landlord must be provided.
Partnership Firm Registration Process
Name Selection
The applicant has to select a name for the partnership firm. The selected name has to be unique, and words that are not approved by Government of India such as a crown, empire, empress, emperor or any other words should not be included in the name of the firm. The name has to be in accordance with the provisions of infringement laws.
Filing Application
After the selection of a name, the applicant has to apply for partnership firm registration in Form 1 by submitting an application to the Registrar of Firms of the respected state where the office of the firm is located. The registration application must be in accordance with the prescribed format and also submit the required fee as stated in the Indian Partnership Act.
Preparation of Partnership Deed
The partnership deed is drafted with the consent of all partners involved in the firm. A partnership deed is drafted on a judicial stamp paper which costs INR 2000 and it has to be signed by all the proposed partners.
Below-mentioned is the components of a partnership deed:
1. Information regarding the partners involved in the firm, such as their name, educational qualifications, permanent address etc.
2. Information regarding the nature of the business and activities performed by the firm.
3. Information regarding the invested capital in the firm by the partners.
4. Information regarding the interests and shares of the partners involved in the firm.
5. Information regarding Profit and Loss sharing ratio of the partners involved in the firm.
6. Details about the rights, responsibilities, duties, commission, and salaries of the partners.
7. Details regarding any loans provided to the firm by any of the partners.
8. Actions that will be followed in case of retirement or death of any of the partners involved in the firm.
Document Submission
The applicant firm has to provide all the necessary documents and the partnership deed.
Issuance of Registration Certificate
After the documents are successfully submitted, authorities will conduct a verification test of the submitted documents and will also confirm that everything is as per the prescribed format.
If the authorities are satisfied with the provided information and documents, and everything is in accordance with provisions of the Indian Partnership Act, the registrar of the firms will grant partnership firm registration certificate.
Conclusion
It is not compulsory to register a partnership firm, as stated under the provisions of the Indian Partnership Act but it is highly advisable to get registration under the Indian Partnership Act, as partnership firm registration offers a range of benefits and provides security to a business.