Partnership Registration

Advantages

Limited Liability Protection to Director’s personal assets
No requirement of Audit
Lower Registration Cost
Separate Legal Entity
Less Procedural Compliances

Minimum Requirements

Minimum Two Partners
DIN of the Partners
No Minimum Capital required
DSC of one of the Partner
One Partner shall be Indian resident

Meaning of Partnership Registration

In India, Partnership Act, 1932 lays down the definition and regulations for Partnership Firm and the provisions of this act (under section 4) defines partnership as – “An agreement between persons who have agreed to share profits of the carried on by all or any one of them acting for all.”

When two or more persons have the same business idea and they wish to work together to turn that idea into reality, they get into partnership by incorporating a partnership firm. So, Partnership is combined ownership of a business between two or more people. Like a sole proprietorship, there is no legal separation between the business and the individual partners. The partnership is formed by an agreement among the partners in which all the terms of partnership is discussed.

The Registration of a partnership firm is not compulsory, though it is usually done as registration brings many advantages to the firm. It is optional for partners to set the firm registered & there are no penalties for non-registration but it is always advisable to get the registration done as it bestows a legal existence and avoid conflicts in future. Partnership Registration is done on their respective state websites.
LLP is one of the easiest types of businesses to incorporate & manage and it integrates the advantages of a Partnership Firm and a Company.

Features of Partnership Firm

Governed by- Partnership Act, 1932
Applicable to- any business, profession or industry
Profit & Loss Sharing- Based on a mutually predetermined ratio
Liability- Unlimited, It allows the use of personal assets to set off the losses.
Tenure- Not fixed, it depends on the partners’ will or as specified in the partnership deed. However, death/retirement/insolvency of any partner among the two auto-dissolves the partnership.

Is it necessary to Register a Partnership Firm?

According to the Indian Partnership Act, 1932 which governs the partnerships, Registration of partnership firms is optional and at the discretion of the partners.

Registration of partnership firms may be done at any time – before starting a business or anytime during the continuation of the partnership.

It is always advisable to register the firm since registered firms enjoy special rights which aren’t available to the unregistered firms.

Documents Required For The Registration Of A Partnership Firm

Application for registration of partnership (Form 1)
Specimen of Affidavit
Certified original copy of Partnership Deed
Proof of principal place of business (ownership documents or rental/lease agreement).

If the registrar is satisfied with the documents, he will register the firm in the Register of Firms and issue Certificate of Registration.

Register of Firms contains up-to-date information on all firms and can be viewed by anybody upon payment of certain fees.

Process of Partnership Firm Registration

The process of Partnership Firm Registration includes a series of steps. These steps are as follows:

Selection of the name for the partnership Firm
Creation & Attestation of Partnership Deed or Agreement.
Registration on the portal as prescribed by the concerned states
Application for PAN after registration of the firm.
Initiation of current account and commencement of business.

Wrapping up

The role of Partnership firms is indeed critical for those with dreams of start-ups and profit & loss sharing. At one extreme, Partnership firm combines the fund of each partner and forms a big source of investment and at another extreme, it divides the risks, losses & uncertainties among the partners. Similarly, profits are dispersed among the partners in a certain predetermined proportion.

Therefore, to avoid conflicts over profit-sharing, decision making, loss bearing on later stages, a duly stamped partnership deed must be prepared and the Partnership firm must be legally registered. Registration of a partnership firm is very important yet very easy that requires only a few lawful formalities.