A Partnership Firm is a popular form of business constitution for businesses that are owned, managed and controlled by an Association of People for profit. Partnership firms are relatively easy to start are is prevalent amongst small and medium sized businesses in the unorganized sectors. After the introduction of Limited Liability Partnerships in India, Partnership Firms are fast losing their prevalence due to the added advantages offered by a Limited Liability Partnership.
There are two types of Partnership firms, registered and un-registered 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.
Drafting Partnership Deed
The Partnership Deed is basically the main theme of the business and is the most important thing which is required to be drafted before startup. So, before startup it is very important to understand the needs of the business, the partners and other relevant details to draft the partnership deed.
If Partnership need to get notarized it will take at least 2 working days to get it done.
Partnership Deed registration
Depending on the choice of the Partners, if partnership need to get registered then it will take around 7- 10 working days.
Apply for PAN & TAN & Bank Account
On the basis of Partnership Deed you can apply for the TAN , PAN & Bank.
To start a partnership firm, the minimum number of partners is two, whereas the maximum number of partners can be 20. The partners must come together to carry on any legal business with the motive of earning profits.
The partnership business is regulated under Indian Partnership Act, 1932. Which prescribes possibility of two types of the firm, unregistered firm, and registered firm. An unregistered firm is formed by entering into an agreement between two competent persons, known as partners, where the firm is not registered with the registrar of firms. Whereas the firms which subsequently get registered with the registrar of firms by submitting the copy of partnership deed and KYC of partners and the registered office is known as the Registered Partnership Firm.
The application for registration of partnership firm is filed with the Registrar of Firms having jurisdiction over the place of business of the partnership firm. The registrar of firms after receipt of the application complete in all aspects with all required documents registers the firm within 1-2 weeks and issues the Certificate of Registration of Firm.
The stamp duty on the partnership deed varies from state to state, and within one state it further varies based on the capital of the firm. You must correctly consider the applicable stamp duty on the partnership deed. The notary of the deed is an essential requirement for partnership registration.
Below is the list of items which should form part of the agreement:-
•The main object and activities of the Firm
•The effective date of the firm
•The duration of the Partnership Firm
•The clause relating Capital Contribution
•Profit sharing ratio of the partners
•Management and Administration of Partnership Firm
•How to resolve disputes
•The deed must be signed before two witnesses
•The deed should be notarized
Yes, a partnership firm can be converted easily into a Limited Liability Partnership or a Private Limited Company. The partnership is an old method of doing business; we always recommend to start a business in the Private Limited form.
Unlike Limited Company or LLP, there is no need to file the annual return for a partnership firm. However, income Tax Return shall be necessary to be submitted at the end of the financial year and within Due Date of filing. There is no provision of audit under the partnership, Act hence a firm does not require to get its books audited. However, if the turnover crosses 2 Crore, then tax audit is mandatory.
Under partnership form of business, there is no separation of ownership and control. The partners act in confidence to each other and act of one partner is binding on another. Partners monitor and manage the firm without any interference. The decision making in case of a firm is relatively a fast process in comparison to that of the Private Limited company, Limited Liability Partnership (LLP).