How to Register a Partnership Firm
How to Register a Partnership Firm
When two or more professionals come together to share a firm and its profits in a particular ratio by mutual consent it is known as a partnership. A Partnership is one of the most important types of business firms. Registering a partnership firm is comparatively easy as it requires minimal compliance.
A partnership is considered by an entrepreneur when he or she finds it hard to arrange capital or resources alone and In addition the nature of the business is quite complicated and requires enhanced control, supervision, and risk-sharing.
There are two types of partnership firms’ viz. Registered Partnership and Unregistered Partnership. According to the Indian Partnership Act, 1932, a partnership firm can be started if your Partnership Deed formulation is successful. Even if the unregistered firm can run without penalties but are deprived of some rights, unlike the registered partnership firm.
Rights denied to unregistered partnership firms are
- Cannot file a suit against the partner or against the other firm
- Cannot file a suit against any third party even if its agreement is in your favor
- Any of the partners cannot claim other proceedings or dispute with the third party
Things to Consider Before Starting a Partnership Firm
- Do not rush while choosing a partner for your firm. Choose someone who has a similar thought process and business goals.
- Register your firm as the nature of a partnership is highly uncertain. Registration creates transparency and balance in a partnership.
- Go for a Limited Liability Partnership as it allows liability protection, Flexibility, Tax Advantages, Credibility.
Deed Formulation
A partnership deed is a document that contains the rights and responsibilities of all the partners. Enforced by a legal procedure, it acts as a guide to carry out various processes of the business. It will also help to solve any discrepancy or disagreement between the partners.
Various Elements of a Deed
- Name of your firm
- Guidelines as per the nature of the business
- Information related to finances like
- Capital invested
- Profit and loss ratio
- Salaries
- Method of distributing the revenue
- Accounting statements that are determined as per fiscal year
- Duties and power of each partner
- Information regarding what steps to take in case a partner dies or withdraws
- Guidelines of dissolving or changing the partnership
Registration of the Partnership Deeds
- Application (Form No. 1)
The partnership is registered by the Form No. 1 i.e. the application, requisite fee and partnership deed. The application is to be attested by all the partners and should be submitted within one year of partnership. This form is submitted with the Registrar of Firms in the office located near your office’s location. The application must contain –
- Name and nature
- Place of business
- Date of partnership
- Full names and addresses each partner
- Duration of firm
- Verification of Application
The application should not only be attested but all verified as per the method mentioned in under the Indian Partnership Act, 1932.
- Documents Required
- Application for registration of partnership
- Specimen of Affidavit
- Original copy of Partnership Deed
- Address proof of the office
- The Naming of the Fir
While choosing a name for your partnership firm you need the follow the rules under section 58(3) of the Indian Partnership Act, 1932, which are as follows
- The names should not contain words like Crown, Emperor, Empire, Empress, Imperial, King, Queen, Royal, etc.
- The name should not be similar to other registered firms
- The Entry of Statement in a Register
According to section 59 of the Indian Partnership Act, 1932, the registrar makes an entry in the official register known as the forms and files the Statement. This is undertaken after the registrar is satisfied with the application.
- Apply for a PAN Card
For getting a PAN card for your firm you need to go to Income Tax Department. Its application procedure is different from the firm registration.
- Open a Bank Account
Once you get a PAN card, it is important to open a bank account so that you can carry out all financial operations via this account.
Conclusion
There are a lot of legal, taxation, and official proceedings for registering a partnership firm. Needs assistance with it? Then you can contact Legal Way LLP, who can help you with detailed attention into these procedures and help you get through it.
