Partnership Firm Registration

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Registration of Partnership Firm

A Partnership is a business arrangement where two or more individuals join forces through a legal agreement to initiate and conduct a profit-oriented business activity, sharing the profits according to the terms outlined in the Partnership deed. This deed outlines the rights and responsibilities of the partners. While registration of a Partnership is not mandatory, it is advisable to register the Partnership with the Registrar of Firms.

What’s Included

  1. Drafting of Partnership Deed
  2. Execution of Partnership Deed
  3. Partnership PAN and TAN

Required Documents

  • PAN CARD: PAN card copies of all the partners.
  • ID PROOF: Aadhaar card/Passport/Voter ID/Driving Licence (Any 1) of all the partners.
  • PHOTO: Passport-sized photos of all the partners.
  • OFFICE ADDRESS PROOF: Proof of the office address – Electricity Bill/Mobile Bill (Any 1).
  • NOC FROM OWNER: No Objection Certificate from the owner of the office.
  • RENT AGREEMENT: Rent agreement for the office (if the property is rented).

Features of Partnership Firm Registration

  • Minimum and Maximum Partners: A partnership requires a minimum of two individuals to start, and the maximum number of partners varies. For banking firms, the limit is typically 10, while for other businesses, it can go up to 20 partners.
  • No Minimum Capital Requirement: There are no mandatory minimum capital requirements to initiate a partnership firm.
  • Partnership Deed Agreement: Every partnership firm must establish a partnership deed, a legally binding agreement that outlines the terms and conditions governing the partnership. Once this deed is in place, the partnership becomes a registered and recognized legal business entity.
  • Optional Registration: While partnership registration is not obligatory, it is highly recommended to undergo the registration process.
  • Qualification Under Indian Contract Act: Partners forming a partnership must meet the qualifications stipulated in the Indian Contract Act.
  • Unlimited Liability: In a partnership firm, partners have unlimited liability. The firm lacks a separate legal entity, so partners are personally responsible for covering losses and settling liabilities from their own assets.

How Many Individuals Are Needed to Establish a Partnership Firm, and What’s the Maximum Limit of Partners?

A minimum of 2 individuals is required to establish a Partnership Firm. The maximum limit of partners allowed is 10 if the Partnership firm is engaged in banking business, and it can go up to 20 partners for any other type of business conducted by the Partnership Firm.

Is a Partnership Deed Mandatory?

A written Partnership deed is not a mandatory requirement. However, it is strongly advisable for Partners to have a written Partnership Deed. This document outlines the terms of the Partnership, including profit-sharing ratios and contributions, helping prevent potential conflicts or misunderstandings among the partners.

Is Registration of the Partnership Deed with the Registrar of Firms Mandatory?

Registering the Partnership Deed is not a compulsory requirement. However, it is recommended to register the Partnership deed because registration allows a partner to file a complaint against a third party or another partner. Additionally, if the Partnership intends to file a legal case in court, registration of the Firm is necessary for legal standing.

How Much Stamp Duty is Required for the Partnership Deed?

The applicable stamp duty for the Partnership Deed is determined by the total contribution made by all the Partners. The rate of duty varies from state to state.

Differences Between Partnership and Company

A Partnership Firm is a collaborative agreement involving two or more individuals to jointly operate a business and share profits and losses among themselves. On the other hand, a Company is a group of individuals united by a common goal of delivering goods and services to customers.

Who Can Establish a Partnership?

The creation of a partnership necessitates the voluntary coming together of individuals who jointly own and intend to operate a business for profit. Partnerships can be formed through written or verbal agreements, and these agreements often outline the relationships between partners and the partnership itself.

Who Can Be Partners in a Partnership Firm?

Any individual who has reached the legal age of majority as per their applicable laws, possesses sound mental capacity, and is not disqualified from entering into contracts under relevant legal provisions, is eligible to become a partner in a partnership firm. In essence, any competent individual can become a partner in a partnership firm.

What is a Sleeping Partner?

A sleeping partner is an individual who contributes capital to a business but does not actively participate in its management or operations.

Is Partner’s Salary Taxable?

The taxation of a partner’s salary depends on whether the remuneration is considered an allowable expense by the partnership firm. If the remuneration is permitted as an expense by the partnership firm, it will be taxable as “Income from Business or Profession” in the hands of the receiving partner. However, if the partnership firm does not recognize this remuneration as an allowable expense, it will not be taxable in the hands of the partners.