Partnership firm represents a business entity that is formed with a purpose of making a profit from the business. Two or more parties come together with a formal agreement (known as Partnership Deed) to own and manage the business. The risk and responsibilities are shared amongst the partners that shred the burden of an individual partner. Also, when two comes together, more capital and expertise are combined that helps to reach the business goal(s) easily.
Partnership Act, 1932 defines the structure of a Partnership firm by providing all the necessary provisions to run the same. The Act validates both registered and unregistered partnership firms in India. However, an unregistered partnership has few shortcomings that attract partners towards Partnership Firm Registration. But, one can overcome it by registration firm anytime after it is formed.
Essential Facts on Partnership
What Is A Partnership Firm?
A partnership firm is a business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Deed that may or may not be registered. In such a business, the members are individually partners and share the liabilities as well as profits of the firm in a predetermined ratio.
Why Should I Set Up A Partnership Firm?
A partnership firm is best for small businesses that plan to remain small. Low costs, ease of setting up and minimal compliance requirements make it a sensible option for such businesses. Registration is optional for General Partnerships. It is governed by Section 4 of the Partnership Act, 1932. For larger businesses, it has lost its relevance with the introduction of the LLP This is because an LLP retains the low costs of a partnership while providing the benefit of unlimited liability, which means that partners are not personally liable for the debts of the business.
Is A Partnership Firm A Separate Entity?
The partners in a partnership firm are the owners, and thus, are not a separate entity from the firm. Any legal issues or debt incurred by the firm is the responsibility of its owners, the partners.
How Many Partners Can There Be?
A partnership must have at least two partners. A partnership firm in the banking business can have up to 10 partners, while those engaged in any other business can have 20 partners. These partners can divide profits and losses equally or unequally.
Is Partnership Firm Registration Necessary?
No, partnership registration is not necessary. However, it is advisable for you to have a partnership firm registration online. Also, remember that for a partner to sue another partner or the firm itself, the partnership should be registered. Moreover, for the partnership to bring any suit to court, the firm should be registered. For this reason, it is recommended that larger business register the partnership deed.
PROCEDURE FOR PARTNERSHIP FIRM REGISTRATION
- Step 1- Application for the registration
- Step 2- Verification of application for registration
- Step 3- Documents to be attached to the application for verification
- Step 4- Fee for registration
- Step 5- Naming the partnership firm
- Step 6- Entry of Statement in a register
- Step 7- Open an bank account
Documents To Be Submitted
Address proof of partners
Photo ID proof of partners
No objection certificate from the owner of the property of the property
Rent agreement of your registered office