Partnership Firm Registration
A partnership firm is very popular in India and is one of the oldest forms of business structure. It is easy to establish a partnership firm as it needs to comply with a minimum set of rules and regulations.
A partnership means an agreement between two or more persons who pool their capital and resources to contribute to the business and agree to share the business profits
The Indian Partnership Act, 1932 governs and regulates partnership firms in India. The persons who come together to form the partnership firm are knowns as partners. The partnership firm is constituted under a contract between the partners. The contract between the partners is known as a partnership deed which regulates the relationship among the partners and also between the partners and the partnership firm.
Benefits of Registration of Partnership Firm
- Easy to Incorporate
- Less Compliances
- Quick Decision
- Sharing Profit and loss
Disadvantages of Partnership Firm
- Unlimited Liability
- No Perpetual Succession
- Limited Resources
- Difficult to raise funds
Partnership Firm Vs Limited Liability Partnership (LLP)
| Basis | Partnership Firm | Limited Liability Partnership (LLP) |
| Legal Status | A firm is not a legal entity. Therefore, it has no legal identity distinct from the personalities of its constituent members. | An LLP is considered a separate legal entity distinct. |
| Registration | The registration of a partnership firm under the Indian Partnership Act is voluntary. | LLP registration is mandatory |
| Authority | The firm must submit the Partnership firm registration form and other subsequent forms to the Registrar of Firms. | An LLP must submit the registration form and all the subsequent Forms to the Registrar of Companies (ROC). |
| Governing Law | The Indian Partnership Act of 1932 | The Limited Liability Partnership Act 2008 |
| Power to enter into contract | A partnership firm cannot enter into a contract in its name. | An LLP can enter into a contract in its name. |
| Perpetual succession | A partnership firm does not have perpetual succession, | An LLP has perpetual succession, which means its existence is not affected when a partner joins or leaves. |
| Power to own property | The partnership firm cannot hold property in its name. | The LLP can hold property in its name. |
| Common Seal | There is no concept of a common seal in a partnership firm. | An LLP has a common seal which denotes the signature of an LLP. The common seal is used to sign documents. |
| Audit of accounts | All partnership firms must get their accounts audited as per the provisions of the Income Tax Act. | All LLPs (except those having a turnover below Rs.40 lakh or contribution below Rs.25 lakh) in a financial year are required to get their accounts audited annually according to the provisions of the LLP Act. |
| Dissolution | A partnership firm can be dissolved by an agreement between partners, court order, mutual consent of partners, insolvency of partners, etc. | An LLP can be dissolved voluntarily or by order of the National Company Law Tribunal (NCLT). |
| Tax Benefits | Partnership have fixed rate of tax. | The LLP offers tax benefits after registration under startup India for three Year out of 10 years |
Who is Eligible for Partnership Firm
- Individual:
Any person who is of sound mind, not a minor, not an undercharged insolvent, and not disqualified from entering into a contract by law can become a partner in a partnership firm.
- Firm
A registered partnership firm can become a partner in another partnership firm.
- Hindu Undivided Family (HUF)
The Karta of a HUF can become a partner in a partnership firm in his capacity if he has contributed his self-acquired or personal skill and labor to the partnership firm.
- Company
Companies are juristic persons and can become partners in a partnership firm if their objects permit it.
- Trustees
Trustees of private religious trusts, family trusts, and Hindu mutts can enter into partnerships unless their constitutions or objects forbid it.
Procedure for Registering a Partnership Firm
- Selection of Name of Partnership Firm
First Step of the formation of Partnership to choose Partnership
- Application for Registration:
An application form has to filed the Registrar of Firms to the State where is registered office will be situated
- Certificate of Registration
If the Registrar is satisfied with application and documents, he will register the firm in the Registrar of Firms and issue the Registration Certificate.
Documents for Registration of Partnership
- Application for registration of partnership (Form 1)
- Certified Original Copy of Partnership Copy
- An Affidavit certifying all the details mentioned in the partnership deed and documents true and correct in all respect
- Pan Card, Aadhar Card and address proof of the partners
- Proof of principal place of business of the firm such as lease agreement