One of the most apparent forms of business organization is Partnership which refers to the relation between persons who have assented to share the profits of a business carried on by all of them or any of them who is/ will be acting for all. Persons who have entered into partnership with one another are called Partners individually and Partnership Firm collectively. The name under which the business of a partnership firm is carried on is called the Firm-Name. (Section 4 of the Indian Partnership Act, 1932)
A partnership firm is one of the leisurely relaxed forms of business organization to be formed considering the minimal compliance burden as compared to other forms of organization.
- Section 4, 11, 13, 30, 58 of Indian Partnership Act, 1932
- Companies (Miscellaneous) Rules, 2014
- Application Form for obtaining registration of the Partnership Firm must be signed by all the partners or their agents authorized in this behalf in the presence of a witness.
- Execution of a contract amongst the partners to define their relationship which may be express or implied by a course of dealing.
- Partnership Firm shall have minimum two Partners and not more than fifty Partners.
- Partnership firm shall have a principal place of business where all communications and notices may be forwarded and taken.
Name of the Partnership Firm:
The Partners of the firm shall mutually choose a suitable name for their firm which shall be unique and doesn’t resemble or is not similar or identical to the name of any existing firm/company engaged in the same business.
For having the Partnership Firm registered, one of the vital documents is Partnership deed which is required to be filed with the Registrar of Firms. Partnership deed shall be created on a judicial stamp paper of appropriate value as may be applicable in the respective state where registration is sought which shall vary on the basis of the capital of the firm. Such deed shall be signed by all the partners in the presence of two witnesses and thereafter the deed shall be notarized by public notary. It shall prima facie specify the rights and duties of the partners and the business of the firm.
Some of the key points considered while preparing a partnership deed are as under:
- Name, address and other details of all the partners
- Nature of Business
- Place of business
- Profit or Loss sharing ratio
- Tenure of Partnership firm
- Capital contribution
- Accounts and audit
- Remuneration to the partners
- Rights and Duties of the partners
- Admission of a new partner
- Termination/Cessation of a partner
- Resignation by a partner
- Dispute resolution mechanism amongst the partners
- Dissolution of the partnership firm
- A minor can also be admitted to the benefits of partnership firm with the consent of all partners.
- All the Partners are entitled and liable for equal share in loss & profit in the absence of any agreement between them. (Section 13)
Application for Obtaining Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) for the Partnership Firm:
The next step is to make an application for obtaining a PAN and TAN with the Income Tax Department which is required to be obtained by all the persons who are responsible for deducting tax at source (TDS) or who are required to collect tax at source (TCS).
Application for Registration (Section 58):
- The Partners intending to make a Partnership Firm may make an application in Form 1 (Form for Incorporation Partnership Firms) * to the Registrar of Firms having jurisdiction over the State where the registered office of firm is situated along with the fees prescribed in Schedule I of the said Act and the following documents:
- Certified original copy of partnership deed
- Specimen of Affidavit
- PAN Card in the name of partnership firm
- Proof of address of the partnership firm, ownership deed, lease and rent agreements, etc. are common acceptable documents
- PAN Card and address proofs of all the partners.
- Such application for shall be signed by all the partners or their agents specifically authorized in this behalf and also verified in the prescribed manner.
- Registration fee and stamp duty in respect of the documents pertaining to partnership firm shall be paid at the time of the submission of such documents with the Registrar of Firms. The registration shall not be complete until all the dues are paid.
- Registration of Partnership firm is not mandatory. However, registration of partnership firm has its own benefits.
- For the registration of each firm, a separate application is necessary. The statement cum application form for seeking registration of firm shall be sent or delivered to the Registrar within a period of one year from the date of constitution of the firm.
- In case of unregistered partnership firm, a partner cannot take any legal action against a co-partner or a firm. Also, in such a case partners cannot enforce their rights against the firm in case of breach of contract.
Certification from Registrar (Section 59):
- The Registrar on being satisfied about the compliance of the provisions of the Indian Partnership Act, shall record an entry of the statement in the Register of Firms and also file the statement. The date on which the Registrar makes an entry and subsequently files the statement shall be the date from which the firm shall be deemed to be registered.
- Registered partnership firm is required to use the words (Registered) with brackets in the end of its name from the date of registration.
Other Statutory Registrations:
The partnership firm shall also make application as per the need of their business for obtaining other statutory registrations such as Goods and Service Tax Identification Number (GSTIN), Provident Fund (PF), ESIC, MSME etc. as may be applicable during the course of its business.