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Overview of Partnership Firm Registration
Generally, the partnership firm is a firm that is collectively owned by partners, operates the business and shares its liabilities and responsibilities with each other based on the terms and conditions of the registered partnership deed. Partnership firms are of two types: registered and non-registered firms, and registering is not mandatory. Still, it is highly recommended that you register for a partnership firm online in India to enjoy various benefits from the government.
Setting up an officially recognized business unit through partnership firm registration takes more than one step. Partnerships occur when two or more individuals choose to work together to attain a business objective by combining their resources and managerial abilities. In India, partnership businesses may be either registered or non-registered. Registered firms have more rights and perks than unregistered firms. The Registrar of Firms, who is in charge of licensing, can do the work at the start of the partnership or as it continues. A very important paper in this process is the partnership contract, which spells out the rules and conditions of the partnership.
Though registration of partnership is not required under the Indian law but registration of a partnership firm clearly have some benefits. Partnership firms in India are governed under the Indian Partnership Act, 1932. Registering a partnership firms includes clearly a stepwise procedure. And by following the steps, the business can ensure smooth progress.
Benefits of Partnership Firm Registration
Partnership firm registration in India offers a range of advantages, including formal approval, simpler creation processes, tax benefits, and improved trustworthiness. These perks not only add to the easy running of the business but also place the partnership for growth, success, and survival in the tough business scene.
- Access to Local Networks and Market Knowledge:
In a partnership firm, each partner can come up with their knowledge and connections specifically in the local regional market. This knowledge and connection allows easy access to the market that helps the partnership firm to operate its business smoothly and effectively.
- Succession and Continuity of Business:
Under the Indian Partnership Act of 1932, a partnership can exist even if a partner leaves or passes away, provided the partnership deed allows for it. In the partnership agreement, the partners can specify how the deceased or exiting partner’s share is to be transferred to the remaining partners or heirs, ensuring business continuity.
- Shared Risk and Responsibilities:
Unlike the sole proprietorship, the partnership firm is governed by partners who share the risk and responsibilities to run the business. Partners can specifically lay down the responsibilities of each partner in the partnership agreement/deed.
- Lesser Formalities as compared to Company:
Unlike, traditional companies which are which are subject to strict regulations under the Companies Act, 2013, the partnership firms have fewer complications and formalities. It is not mandatory to them to file annual financial statements, hold shareholder meetings which makes it easy to operate.
- Investment through Silent Partners:
A partnership firm can have ‘silent partners’ that can contribute to the capital and investment in the firm and they do not participate in day-to-day management of the firm. This hidden investment allows businesses to expand.
Tax Benefits of Partnership Firm
|
Tax Benefit |
Description |
|
Pass-Through Taxation |
Profits are taxed in the partners’ hands, not at the firm level, which avoids double taxation. |
|
Income Tax Rate |
A flat tax rate of 30% on the firm’s income (plus surcharge and cess). |
|
No Dividend Distribution Tax (DDT) |
No DDT on profits distributed to partners. |
|
Loss Carry Forward |
Business losses can be carried forward for up to 8 years to offset future profits. |
|
No Minimum Alternate Tax (MAT) |
No MAT applies, unlike companies. |
Requirements for Partnership Firm Registration in India
To create a partnership business in India, the following requirements must be met to ensure an easy registration process:
- Minimum Partners: Only two partners are allowed to form a partnership firm in India. It offers better problem-solving skills in the partnership deed.
- Partnership Deed: To make a partnership deed, partners need to formally entered into a partnership deed that formalizes the contractual relationship between the partners and lays down the roles and responsibilities of each partner.
- Unique Name: It is mandatory for the partners to choosing a unique name for the partnership firm. The chosen name has to meet with the naming rules set forth by legal authorities.
- Registered Office: Providing a legal address for the registration office of the partnership company is a basic condition. The listed office serves as the official address of the partnership company for contact and legal reasons. It is important to have a real place where legal letters and notes can be sent.
Eligibility Criteria for Partnership Firm Registration in India
- Major Person: A partnership deed can be formed by two or more adults who are a minimum of 18 years old.
- Indian National: To register a partnership firm in India, the partner must be an Indian citizen. Foreign national are not allowed to form any partnership firm in India.
- Minimum 2 partners: As the name suggests, two major person are mandatory to form a partnership firm in India. A partnership firm can have maximum 20 partners.
Documents Required for Partnership Firm Registration
The following documents are required to register a partnership firm in India:
1. Partnership Deed:
Though partnership deed is not required under the partnership act but it specifies the roles and responsibilities of each partner. It is a standard document and notarization or registering of partnership deed offers legal benefits like it acts as the valid proof of the partnership in case of a dispute.
2. PAN Card of the Firm:
It is mandatory that the partnership firm to have its own PAN card. While applying for the registration of the partnership firm, two copies of the PAN card needs to be submitted to the Registrar office.
3. KYC Documents of the Partners:
Individuals acting as partners in the partnership firm have to submit the following documents to prove their identity and status to be part of the partnership firm:
- Aadhar card
- PAN card
- Address proof (like utility Bills)
- Passport-sized photographs
4. Address of Registered office of the Firm:
It is mandatory to submit the document that showing the registered address of the partnership firm. It includes lease agreement or rent agreement.
5. Form 1:
It is an official document which is used to register a partnership firm. It is available at the Registrar of the firm in all states. In the form, the exact nature of the business activity and details of the partners are filled in. The form needs to be submitted physically to the registrar.
Partnership Firm Registration Process in India
The partnership firm registration process includes several key steps to ensure legal compliance and start the partnership successfully:
Step 1: Choose Your Business
The foremost step of registering a partnership firm is that the partners need to decide the business that shall be carried out in the firm. While filing the form for registration, the exact nature of the business of the firm has to be mentioned.
Step 2: Choose Name
Choosing a name for your partnership firm is a critical step. The name has to be unique and should reflect the nature of your business. It is advisable to avoid confusion and to be similar to a well-known company or trademark.
Step 3: Draft the Partnership Deed
This is the most important document. It formally lays down all the rules and regulations of the partnership firm. The partnership deed should clearly specify the following:
- The name and address of the firm.
- Who are the partners, and where do they live?
- How profits and losses will be shared.
- Each partner’s role in the business.
- What happens if someone wants to leave or join the firm?
Step 4: Documents Preparation
The following documents are needed to register the partnership:
For the partners:
- PAN card of each partner (yes, even if the partner is a company).
- Aadhaar card or passport for identity proof.
- Photographs of all the partners.
- Proof of address (could be a utility bill or bank statement) for each partner.
For the firm:
- Proof of the business address (such as a lease agreement, utility bill, or property tax receipt).
- The partnership deed is signed by all partners.
Step 5: Fill Out Form 1
Form 1 is the official which is needed to register your partnership with the Registrar of Firms. It’s basically an application for registration and includes:
- The name of your firm.
- A description of your business.
- The full names and addresses of all partners.
- The date your business starts.
- And other basic details.
Step 6: Submit the Forms
Once you have filled out Form 1, you need to submit it to the Registrar of Firms in your state, along with all the documents we just mentioned (partnership deed, proof of address, PAN cards, etc.). Some states allow you to do this online, while in others, you might need to do it physically. The fees for registration vary from state to state.
Step 7: Wait for Approval
The Registrar of Firms will look over your documents. If everything is in order, your partnership will be registered. After the registration, Registration Certificate is issued for your firm, which is the legal proof that your partnership exists.
Step 8: Apply for PAN & TAN
After your firm is registered, it is mandatory to get a PAN card for the firm itself (this is a must for filing taxes and other financial dealings). If your firm will be deducting taxes at source (TDS) from payments, you’ll also need a TAN (Tax Deduction and Collection Account Number).
Step 9: Register for GST (if applicable)
If annual turnover of the firm exceeds a certain limit (currently Rs. 40 lakh for goods or Rs. 20 lakh for services), GST registration is mandatory.
Step 10: Open a Business Bank Account
After the registration of the partnership firm, a bank account in the name of the partnership firm needs to be opened.
By following these simple steps, you can handle the partnership company registration process quickly, form a legally compliant partnership, and set a sound basis for your business efforts. Experts will support you at every stage, from advice to compliance, ensuring a smooth and successful registration experience for your partnership business.
Compliance after Partnership Registration
After forming a partnership company, compliance is important to ensure legal respect and operating efficiency. Following are the compliances that must be adhered to in order to smoothly run the business:
- Maintain Proper Books of Accounts
Under the Indian Partnership Act, 1932, maintaining accurate and up-to-date books of accounts is a must for all partnership firms. These records help track income, expenses, and profits, and they serve as a reference for tax filings and resolving disputes between partners.
- Income Tax Filing
All partnership firms are required to file income tax returns annually with the Income Tax Department. Depending on the income of the firm, it will either be taxed at individual partner rates (if it's an unregistered firm) or as a separate entity (if it is a registered firm).
- TDS (Tax Deducted at Source) Compliance
If the partnership firm makes payments to contractors, vendors, or employees, TDS (Tax Deducted at Source) deduction is mandatory before making the payment.
- GST Compliances
If the turnover of the partnership firm reaches Rs. 40 lakh for goods or Rs. 20 lakh for services), GST registration and post-GST compliance are mandatory.
Why Choose Kanakkupillai for Partnership Firm Registration?
With over more than 50,000+ registrations, Kanakkupillai is a top and trusted choice for partnership firm registration for several key reasons:
- Expert Guidance: Our team of legal and accounting professionals helps you through every step of the registration process.
- Efficient Processing: We ensure you a quick and hassle-free registration process aimed at minimizing delays.
- Transparent Pricing: We offer clear pricing with no hidden fees. Every fee is made clear at the beginning.
- Post-Registration Services: We offer comprehensive services like GST registration, tax filing, and compliance support, to ensure your business remains complaint throughout the year.
We offer end-to-end assistance in setting up your business that keeps you away from the hassle of registration.
Frequently Asked Questions
What is the cost of partnership company filing in India?
The cost of partnership company registration in India is around Rs. 2,000 to Rs. 3,000.Can a partnership company be established online?
Yes, partnership firms can be formed online in India, giving an easy process.Is it required to have a company agreement for registration?
While not required, having a partnership document for filing is highly suggested.How long does it take to create a partnership firm?
Registering a partnership company in India usually takes around 10 to 14 working days.What are the tax effects of a registered partnership firm?
Registered partnership firms have tax effects that vary based on the business structure and income.Can a partnership business be changed into a private limited company?
Yes, a partnership business can be changed into a private limited company in India.What are the benefits of forming a partnership firm?
Registering a partnership company offers perks like simpler processes and cost-effectiveness.Do foreign people need special permissions to be partners in an Indian partnership firm?
Foreign individuals can be partners in an Indian partnership company with no special permissions needed.What is the difference between a registered and inactive joint firm?
The key difference is that a registered partnership company gets certain rights and perks.Can a current partnership business add new partners after registration?
Yes, a current partnership business can add new partners after registering based on joint agreement.We Provide Best Quality
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