A Partnership Firm is a popular business structure where two or more people come together to start a business and share profits and responsibilities according to an agreed ratio.
The registration of a partnership firm, though not mandatory under the Indian Partnership Act, 1932, is highly recommended to gain legal benefits, easy dispute resolution, and business credibility.
Simple Partnership Formation Process
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What is Partnership Registration?
Partners need to enter into an agreement which is popularly known as Partnership Deed, for starting a Partnership registration procedure. While creating a partnership instrument (Deed) the partners must purchase stamp paper of appropriate value to be annexed with the agreement as different states impose different stamp duty on the partnership deeds. An agreement can further be notarised. The same can be registered as document by filing the same before the registrar of documents, to bring more stable document which is admissible under law without any doubt, such a notary or registration does not amount to registration of firm as such. Section 69 of the act specifies effect of Non Registration, which means an unregistered firm shall not be able to recover any sum more than Rs. 100 that’s why though registration of partnership Firm has not been mandatory under The Partnership Act, 1932, but it is strongly recommended to the partners to get the firm registered. By filing the deed and Know Your Customer (KYC) Documents of the partners and KYC of premises where the address of firm shall be situated the registration of Firm can be obtained.
Easy to Start
By creation of an agreement by the partners, Partnership business can be started. As the registration is not mandatory partnership firm can be started within day time. However the registration with the registrar of documents ot notarisation of the agreement may be taken up later on. Similarly the registration of firm with the registrar of firms can also be taken up in due course of time.
Business Name
Partners start the partnership firm with a separate name in the deed, which is known as name of the firm, which acquire goodwill and value over a period of time. Care should be exercised while deciding a name and check if it conflict with other trademark. Free consultancy on Name Check and how to protect Business Name, its Logo, Punchline etc are provided by our specialists.
Annual Filing NOT Required
There is no need to file annual return for a partnership firm as like Limited Company or LLP. However at the end of the financial year, income Tax Return shall be required to be filed within Due Date of filing. At the end of the financial year there is no provision of audit under the partnership, Act, hence a firm does not require to get its books audited. However tax audit is mandatory, if the turnover crosses 2 Crore.
Decision Making
There is no separation of ownership and control, under partnership form of business, they control and manage the firm without any interference. The act of one partner is binding on another, partners act in confidence to each other. In comparison to that of private Limited company, Limited Liability partnership (LLP) the decision making in case of a partnership firm is relatively a fast process.
Flexibility in operation
Unlike the specific method of operation as mentioned in article of association in case of a company, the law dealing with the affairs of the partnership business does not require it. The agreement of partners which lays down the procedure of running day to day operation of the firm. Truly said that there is flexibility in operation of partnership business.
More Capital Available
In case of the partnership firm as there are many partners in contrast with the proprietorship business where only one person invests in the capital of the business, this means that money can be introduced as capital in the firm with more partners. Further to introduce fresh round of capital in due course of time another partner can be added.