PARTNERSHIP FIRM REGISTRATION

A Partnership firm is running the business by the partners those who agreed to share the profits or loss of the business equally or as mentioned in the partnership deed . Partnership firm is a business entity for small and medium enterprises wherein two or more persons decides to contribute to a business and share the profits or losses. In India, Partnership firm are widely prevalent because  its easy  to incorporate with  minimal statutory compliance. Also, the concept of LLP  has  introduced in 2010, whereas the Partnership Act, 1932 has been in existence before the independence of India. Hence, partnership firms are the most prevalent type of business entity wherein a group of people are involved with limited liabilities .

TYPES OF PARTNERSHIP

There are two types of the Partnership firm which  registered  under the Partnership Act, 1932, (Act), the only criterion to commence business as a partnership is the finalization and execution of a Partnership Deed between the Partners. The Act does not require the Partnership Deed/Partnership Firm to be registered and in other words, does not require the Partnership Firm to be a registered Firm.

There is no penalties for non-registration of a partnership firm, and a partnership firm can even be registered after formation. However, unregistered partnership firms have certain rights denied in Section 69 of the Partnership Act, which deals with the effects of non-registration of a partnership firm. Some of the disadvantages of an unregistered firm are:

• A partner of an unregistered firm cannot file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act.
• No suit to enforce a right arising from an agreement can be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered.
• An unregistered firm or any of its partners cannot claim set-off or other proceedings in a dispute with a third party.

Therefore, any partnership should be registered sooner or later.

DIFFERENCE BETWEEN LLP & PARTNERSHIP

Cost Component : The cost for registration of LLP is normally higher than the cost for registration of a partnership firm. LLP registration can be completed through online with filling fee  of  Rs.5899.

Authority: LLPs are registered in India under the Ministry of Corporate Affairs, Central Government. Partnership firms are registered with the Registrar of Firms, Controlled by the respective State Government in which the firm is registered.

Limited Liability Protection: The main advantage of a Limited Liability Partnership over a traditional partnership firm is that in an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence. An LLP also provides limited liability protection for the owners from the debts of the LLP. However, unlike private limited company shareholder, the partners of an LLP have the right to manage the business directly.

Number of Partners: LLPs and Partnership Firms must have a minimum of two partners to be registered. Post incorporation, an LLP can have unlimited partners. In case of a Partnership Firm, if the number of partners at any time reduces below the mandatory minimum of 2 due to death, incapacitation or resignation of a Partner, the partnership firm would stand dissolved. On the other hand, in case of an LLP, if the number of Partners reduces below 2, the sole Partner can still find a new Partner to fill the position without dissolution of the LLP.

REGISTRATION OF PARTNERSHIP FIRM

A partnership firm can be registered under Section 58 of the Indian Partnership Act at any time, even subsequent to the formation. The registration of a partnership firm is done through the Registrar of Firm in which the partnership firm is situated. When the Registrar of Firms is satisfied that the provisions of Section 58 are complied with, a record of entry of the statement is made in the Register of Firms and Certificate of Registration is issued.

DOCUMENTS REQUIRED FOR REGISTRATION OF PARTNERSHIP FIRM

The application for registration of Partnership Firm must contain the prescribed registration form for incorporation of a company, identity proof/address proof of Partners, certified a true copy of the Partnership deed entered into and proof of the principal place of business.

As identity and address proof of the Partners, any of the following two documents can be submitted:

• PAN Card
• Passport
• Drivers License
• Aadhar Card
• Voters ID

Proof of the principal place of business can be established by submitting the following documents:

• Sale deed in case one of the Partner owns the place of business
• Rental agreement copy if the premises are rented
• Copy of latest electricity bill or water bill or property tax receipt

ADVANTAGES OF A PARTNERSHIP FIRM

The main advantages of a Partnership Firm to follow the limited statutory  compliance. As compare to the  LLP  which required  the annual filing of its financial statements with the Registrar of Companies. Registered/unregistered Partnership Firms are not required to file any annual returns, and the financial statements of a partnership firm would NOT be made publicly available. Also, the accounts of a registered / unregistered partnership firm are not required to be audited. Whereas, the accounts of a Limited Liability Partnership (LLP) are required to be audited by a practicing Chartered Accountant when the turnover exceeds Rs.40 lac per annum or when capital contribution exceeds Rs. 25 lac .

DISADVANTAGES OF A PARTNERSHIP FIRM

Partnership firm does not provide its Partners with limited liability protection and does not have perpetual existence. Also, the interest of a Partner in a Partnership firm is not easily transferrable, and the ownership structure does not allow for investment from Angel Investors, Venture Capitalists or Private Equity Firms. Banks / Financial Institutions also prefer to lend to Companies than Partnership Firms as Companies are separate entities and the regulatory requirement for financial reporting of Companies – makes a company more transparent and structured.

PARTNERSHIP FIRM TAXATION

Partnership firms may be assessed either as a partnership firm or as an association of persons(AOP). Interest paid to partners, salary, bonus, commission, or remuneration to a partner will be allowed as a deduction paid to a working partner who is an individual. However, when the Partnership Firm is assessed as an AOP, the above deductions cannot be claimed. Therefore, for a partnership firm, it is more advantageous to be assessed as a partnership firm than as an AOP. For a partnership to be assessed as a firm, the partnership should be evidenced by a written partnership deed. Income tax return of a partnership firm is filed in Form ITR-5.

PARTNERSHIP FIRM REGISTRATION PROCESS

Registration Process time is required 5 to 7  working days .  At the beginning of the engagement, our professional team will  brief you the relevant  documents which is required for registration of partnership firm. You can submit all those  information and the documents by e mail . Once, the documents and information are verified than partnership deed will be drafted  and its sent you by e mail  to the Partners. All the Partners must sign the document on legal stamp paper and upload a copy on the platform. Once, the signed partnership deed is available; it is registered with the concerned Registrar of Firms and Certificate of Registration of Partnership Firm is provided. In addition to delivering the Certificate of Registration of Partnership Firm.