Partnership Firm Registration

Partnership firm Meaning

A partnership firm is a form of business entity where two or more partners come together to do business through mutually agreed upon terms. The agreements of these terms are specified in the partnership deed.

Partnership registration is easy and is preferred among small and medium sized businesses in the unorganized sectors. The partnership firm will be maintained so long as partners agree.

Types of partnership firm

There are 2 types of partnership firm
• Registered
• Unregistered

• Registered Firm needs to form a legal partnership deed and the benefit of the same is that it is more reliable as it is documented form of agreed terms and profit sharing ratio etc. The partnership firm can sue any person.
• The registration of a partnership firm is done through the Registrar of Firm of place where partnership firm is situated and only when it satisfied that the provisions of Section 58 of The Indian Partnership Act, 1932 are complied with. A Certificate of Registration is issued by Registrar.
• An unregistered firm or any of its partners cannot claim set-off or other proceedings in a dispute with a third party.

Essential Elements of partnership Deed

• The firm-name
• The nature of business of the firm
• The place or principal place of business of the firm
• The names of any other places where the firm carries on business
• The date when each partner joined the firm
• The names in full and permanent addresses of the partners
• The duration of the firm
• Other clauses as agreed between the partners

Licenses to be obtained for Partnership Firm

Partnership firm to run through smoothly may obtain following license:

• Trade License
• Shop & establishment Registration
• MSME registration or Udhyog Adhar
• PAN/TAN Registration
• GST Registration
• FSSAI Registration
• Import Export Code

Why the firm should take the above mentioned license

• MSME license will help in government affiliated project and benefit of concessional fee in many case such as bar code application, trademark application.
• Trade license and shop license is compulsory by law to be taken if not taken than will be liable for penalty and its necessary to take these license as legal compliance.
• GST registration when crosses threshold limit.(It can be take voluntary also)
• TAN/PAN of business Organisation
• FSSAI is to be taken when firm is involved in business of Food.
• Import export code is to be taken when involved in any export / import of goods/ services.

Documents required for Partnership Firm

• Copy of PAN Card of partners
• Copy of Adhaar Card/ Voter identity card/ Voter I’d/ Driving License/ Passport (Any one)
• Passport size photograph of Partners
• Registered premise proof of your Business place-
  •Rent Agreement & latest month electricity bill / Water Bill (if rented)
  •Electricity Bill (if Owned)/ Property tax receipt
• Photo of shop with name of firm
• Contact Number of all Partners
• E mail I’d of all partners
• Certified copy of the Partnership deed on appropriate non-judicial stamp paper.

Partnership Firm Process and Procedure

• Select the name of partnership firm
• Drafting of Partnership Deed
• Get a printout of the partnership deed on a stamp paper and get it signed by your partners.
• Fill the partnership firm registration application form with your personal and business details, and submit it to the Partnership registry along with the partnership deed.
• Application for PAN and TAN of the partnership firm

Advantages of Partnership Firm

• It is easy to establish and start-up costs are low.
• Partner's business affairs are private as not available for public because registered/unregistered both Partnership Firms are not required to file any annual returns, and the financial statements.
• There is limited compliance for Partnership firm as compared to LLP & Private Limited companies.
• Partner’s share in profit is exempt under income tax.

Disadvantages of Partnership Firm

• Partnership firm does not have Separate legal entity as Partners and the partnership firm are treated as single identity.
• Partners are jointly and severally liable for any liability of the firm as their liability is unlimited.
• It does not have perpetual succession as this depends upon the will of partners.
• Partnership firms are taxed at flat 30% on its profits.
• FDI is not permitted in partnership firm.
• The maximum number of partners can’t exceed 20 partners.

Income tax for partnership firm

• Flat tax @30%
• Surcharge-If income is greater than Rs.1 crores, 12% of income tax amount. Subject to marginal relief.
• Health and Education cess-4% extra – charged on the amount of income tax + surcharge being paid.