Partnership Firm is just like an arrangement where parties,known as Partners,agree to cooperate to advance their mutual interests.Partnership Firm allows joint ownership of a business.Partnership firm are good for small business entity in unorganized sector.
In partnership Firm basically the Partner’s percentage of ownership various and depends on certain factors. Partnership firm has no limit on the minimum capital for their establishment .The partnership is very easy to startup a company. Partnership recognized by a government body may enjoy special benefits from taxation policy.
Partnership Firm registration is done by legalstartup.in
Inclusive In Our Service
- Drafting of Partnership Deed
- Name Search & Approval
- PAN & TAN
- MSME Certificate (Optional)
There are two types of Partnership, registered Partnership and unregistered Partnership. As far as the Indian Partnership Act, 1932, (Act), the main foundation to begin business as a partnership is the finish and execution of a Partnership Deed between the Partners. The Act doesn’t require the Partnership Deed/Partnership Firm to be registered and at the end of the day, doesn’t require the Partnership Firm to be a registered Firm. In this manner different partnership businesses exist as an unregistered firm.
There are no punishments for non-enrollment of a partnership firm, and a partnership firm can even be registered after development. In any case, unregistered partnership firms have certain rights precluded in Section 69 from claiming the Partnership Act, which manages the impacts of non-enlistment of a partnership firm. A portion of the impediments of an unregistered firm are:
A partner of an unregistered firm can’t record a suit in any court against the firm or different partners for the requirement of any privilege emerging from an agreement or right presented by the Partnership Act.
No suit to implement a privilege emerging from an understanding can be organized in any Court by or for the benefit of a firm against any outsider except if the firm is registered.
An unregistered firm or any of its partners can’t guarantee set-off or different procedures in a debate with an outsider.
In this way, any partnership ought to be registered sometime.
Advantages of a Partnership Firm
Easy To Start and Close Business:
One of the main advantages of a Partnership Firm is that there are very minimal requirements in terms of compliance. For instance, a Company or LLP requires the annual filing of its financial statements with the Registrar of Companies. Such documents filed with the MCA are also made public documents. On the other hand, 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 practising Chartered Accountant when the turnover exceeds Rs.40 lakhs per annum or when capital contribution exceeds Rs. 25 lakhs.
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.
Q. How many people are required to start a Partnership firm?
Q. What are the requirements to be a Partner in a Partnership firm?
The Partner must be an Indian citizen and a Resident of India. Non-Resident Indians and Persons of Indian Origin can only invest in a Proprietorship with prior approval of the Government of India.
Q.What are the documents required to start a Partnership firm?
PAN Card for the Partners along with identity and address proof is required. It is recommended to draft a Partnership deed and have it signed by all the Partners in the firm.
Q.What is the capital required to start a Partnership firm?
There is no limit on the minimum capital for starting a Partnership firm. Therefore, a Partnership firm can be started with any amount of minimum capital.
Q.Who will register a Partnership firm?
Partnership firms are registered by the Registrar of Firms, under the Indian Partnership Act, 1932.
Q.How to open a bank account for a Partnership firm?
To open a bank account for a Partnership firm, a registered Partnership deed along with identity and address proof of the Partners need to be provided.
Q. Is it necessary to draft a Partnership deed?
It is not necessary to have a written partnership deed but it is recommended to avoid any conflict between the partners in the future.
Q. What is dissolution of partnership firm?
Section 39 of the Indian Partnership Act, provides that “the dissolution of the partnership between all the partners of a firm is called the dissolution of a firm.” It implies the complete break down of the relation of partnership between all the partners.
Q. Can i name my partnership firm whatever i want?
Yes, you can name whatever you want however that business name is not secured under laws from being copied. We advise you to incorporate LLP if you want to protect your business name
Q. Can other people invest in a Partnership firm?
Indian Nationals and Indian Residents are allowed to invest in a Partnership firm without any approval. Usually those who invest in the Partnership firm become a Partner of the firm and in the absence of any agreement to the contrary, all partners will have a right to participate in the activities of the business.