A partnership firm is a crucial form of business organization and is widely used in India. It requires a minimum of two individuals to establish. In a partnership firm, two or more people come together to start a business and share its profits based on an agreed ratio. This business structure encompasses various trades, occupations, and professions.
Partnership firms in India are governed by the Indian Partnership Act of 1932. The individuals who establish the partnership firm are referred to as partners. The partnership firm is formed by a contract among the partners, known as a partnership deed. This deed regulates the relationships between the partners and the partnership firm.
Documents Required For Registration Of Partnership Firm
The following documents are required to register a partnership firm in India. They are:
- Application for registration of partnership (Form 1)
2 . Certified original copy of Partnership Deed
3. specimen of an affidavit certifying all the details mentioned in the partnership deed and documents are correct
4 . PAN card and address proof of the partners
5 . PAN card and address proof of the firm
6. Proof of principal place of business of the firm (ownership documents or rental/lease agreement)
Remember to keep the following documents ready, as they are important for the registration of your business as a partnership firm.
Procedure For Registering For Partnership Firm
Once you have the required documents you can start the procedure for registration for the partnership firm in India. The steps for the registration are:
Step 1: Application for Registration
- File Form 1 with the Registrar of Firms of the State where the firm is located along with the required fees. The form should be signed and verified by all partners or their agents. Form 1 can be obtained from the Registrar of Firms office or downloaded from the respective state’s Registrar of Firms website.
- The application can be sent to the Registrar of Firms online(each state has its website for registration). It should include details such as the firm’s name and principal place of business, locations of other places where the firm carries on business, date of joining of each partner, and the names and permanent addresses of all partners.
Step 2: Selection of Name of the Partnership Firm
- Any name can be chosen for a partnership firm, but it should not be too similar or identical to an existing firm in the same business. Additionally, it should not contain words like emperor, crown, empress, empire, or any other words that indicate the sanction or approval of the government
Step 3: Certificate of Registration
- If the Registrar approves the registration application and documents, the firm will be registered in the Register of Firms, and a Registration Certificate will be issued. The Register of Firms contains up-to-date information on all firms and access to it is available upon payment of certain fees.
- Submit an application form and fees to the Registrar of Firms of the State where the firm is located. The application should be signed by all partners or their agents.
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Advantages Of Partnership Firm Registration
A partnership firm registration offers a wide range of advantages for your business ensuring its wide growth and better future.
Incorporating a partnership firm is straightforward compared to other types of business entities. It involves drafting a partnership deed and agreeing upon its terms. Unlike corporations or LLPs, there’s no requirement for additional documentation or mandatory registration with the Registrar of Firms initially; registration can be pursued later as it’s optional.
Partnership firms entail fewer regulatory obligations than companies or LLPs. Partners are not required to obtain Digital Signature Certificates (DSCs) or Director Identification Numbers (DINs), mandatory for directors or designated partners in other entities. This simplicity extends to making changes within the firm, which can be done with relative ease and at lower costs compared to more formalized business structures. Dissolving a partnership firm also involves fewer legal formalities.
Decision-making in a partnership firm is efficient because partners jointly manage and own the business, enabling swift implementation of decisions without hierarchical delays. Partners have broad authority to act on behalf of the firm, including certain transactions that don’t require unanimous consent.
Profits and losses in a partnership firm are shared equally unless otherwise stipulated in the partnership deed. This arrangement fosters a sense of shared ownership and accountability among partners. Importantly, partners share the liability for the firm’s activities jointly and severally, thereby distributing risk and responsibility across the partnership.
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