Know All About Partnership Registration
A partnership firm is a kind of business organization. As such it is also regarded as one of the most important kinds of businesses out there. This is basically a kind of company where two or more individuals come together and form a business.
They decide to split the profits of the company as well but in a ratio that is mutually agreeable to all of them. It is quite easy to form a partnership company as the compliance related requirements are much lesser than other kinds of companies. The registration of such companies in India is governed by the Indian Partnership Act, 1932.
Normally there is no law that mandates the formation of such a company. It happens to be optional – it is up to you and your partners to decide whether you want to register your partnership firm or not.
But registering a firm under Partnership Act is always advisable which ensures that you get a legal proof of the firm’s existence where your customer could have a trust on your establishment.
Apart from this, the Act provides various benefits and rights to every partner like filing a suit in case of disputes, settling claim against third parties, etc.
So, it is always better to get your firm registered at Registrar of Firms/ Departments of the Regional State Registrar where you are planning to set up the business.
The best part of the registration process of such a company is that you can do it at any time of your choice – either before starting your business or after having started it.
Why are partnership firms so popular?
As has been said already, it is really easy to form partnership firms in Karnataka India as they need a lot less by way of compliance compared to other forms of a company. This is perhaps the major reason as to why these companies enjoy such a high degree of popularity.
Apart from that these companies have some taxation related advantages as well. If you register your business as a partnership company, you would not have to pay any business income tax as such.
As a partner you can file the losses you have incurred or the profits you have made in your personal income tax only. This means that your business would not be subjected to taxation as such.
With a partnership you have more than one source of funds, which always comes in handy especially when setting up a company.
What are the features of a partnership firm?
As opposed to a proprietorship firm; in a partnership there are at least two owners of a company is required. The maximum number of partner permissible is 10, in case of such companies in India; as far as banking work is concerned. However, if non-banking work is taken into account this number can go up to 20 as well.
As has been said already, the partnership company has good features for those who wants to run their business with full ownership. An agreement between the partners can spell out the profit or loss sharing, roles, positions and management among them. The thing with a partnership is that these contracts need not always be a written one – it can be an oral one as well.
Normally, a partnership business is created with the intention of doing some business in a lawful manner and also to share in the profits as well as the losses. Companies formed with a charitable intent are not partnerships.
In a partnership firm, you also have a greater amount of knowledge, wisdom, and resources to draw from. It has also been seen that these companies normally have lot more contacts as well. Since there is more than one owner in such a firm there is always a chance that the management could be better than a proprietary firm.
How to choose the name of a partnership?
There are a few things that you need to keep in mind while choosing the name of your partnership firm.
First of all, it should not be identical or highly similar to a company that is already in the same line of business as you wish to be in or are in. This is forbidden for the simple reason you could be damaging the goodwill or reputation of that particular firm by choosing such a name.
In secondly, it would also be better if the name of your partnership company does not contain words such as emperor, empress, crown, empire, or any other word that may come across as approval or sanction of the government. It should not in any way show that it is being patronized by the government.
Why should you have a partnership deed?
As it has been said already, a partnership deed in a partnership firm can be either a written one or an oral one. Normally, a partnership deed is a very important agreement in the sense that it contains the rights, profits, duties, shares, and other such obligations of each and every partner in such a company.
Section 4 of Partnership Act, 1932 defines that an agreement between the partners/ persons need to be agreed by all or any one of the members for sharing of profits up to how much from business carried on. And the registration of partnership deed takes care of all disputes as per the terms and conditions under which the partnership was formed.
The benefit of a written deed is that it serves as an inalienable record and thus comes in really handy at the time of any conflict in the future. Normally, when you make a partnership deed there are some general details that have to be included. They may be enumerated as below:
- Name and address of your partnership firm as well as that of the partners
- Capital that each partner is supposed to contribute
- Nature of business
- Profit and loss sharing ratio among the partners
- The date when the business started
Apart from these some specific details should be there in the partnership deed as well as they would also help avoid any conflict during the later stages. You need to mention the interest applicable for the capital that has been invested in the firm, interest for any loan that a partner may have provided to the firm, and interest on drawings made by partners. The commissions, salaries, or any other amount to be paid to the partners need to be mentioned in the deed as well.
The partnership deed should contain details on the rights of each partner. This should also include the extra rights that only the active partners would be eligible for. The obligations and duties of the partners need to be mentioned as well. This deed should also contain the processes and adjustments that have to be adhered to when a partner passes away or retires from the firm.
Partnership firm registration process
Through the below steps a business can be perfectly registered as a partnership firm:
- Choose a unique partnership name
- Prepared an agreement or deed for partnership business
- Register the business in Regional Registrar of Firm and obtain the certificate
- Apply PAN for your business name
- Open a current bank account in the name of business
How to register a partnership firm?
If you want to know how to form a partnership firm in Bangalore, you need not worry as we are expert in this domains, providing business solutions to overcome the problem you faced and more than that we are ready to help you. If you need our assistance in this matter, we would always be happy to help.
The application form in this case needs to be submitted along with the required fees. Normally in these cases the Registrar of Firms should be of the state where you wish to do business. You also need to make sure that the application contains the signatures of all the partners. At least their agents should sign the same.
Necessary documents required to register a partnership?
Following are the documents that you need to provide to the Registrar of Firms while registering your company as a partnership firm:
- Application registering the partnership – Form 1
- Certified original copy of the partnership deed
- A specimen of the affidavit
- Proof of the central location of business – in this case you can provide lease or rental agreement or ownership papers as well
- Identity proof of partners – PAN Card, Aadhaar, Voter ID, Passport
- Address proof of partners – Electricity Bill, Mobile/ Phone Bill, Bank Statements (not older than two months)
- Stamp duty of appropriate value through Stamp papers
- Photographs of all partners
If the Registrar happens to be satisfied with all the documents that have been furnished by you she or he would register your firm in the Register of Firms and would issue your Certificate of Registration as well. The Register of Firms has all the latest information on each and every partnership firm working in a state. However, in order to be able to view it you have to pay a certain amount of fees.