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Basics of Partnership Registration
To start a Partnership firm, partners need to enter into an agreement which is popularly known as Partnership Deed. Different states impose different stamp duty on the partnership agreements/deeds. So, while creating a partnership instrument (Deed), the partners must purchase stamp paper of appropriate value, as applicable in the respective state, to be annexed with the agreement. You can further get an agreement notarized. Sure, registration of partnership Firm is not mandatory under The Partnership Act, 1932. However, Section 69 of the act specifies the effect of Non-Registration. According to Sectio 69, an unregistered firm shall not be able to recover any sum more than Rs. 100. Hence, we strongly recommend that you register the partnership firm with the Registrar of Firms ( ROF).
Requirements to Register a Partnership Firm
Procedure for Registering a Partnership
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Documents Required for Partnership Registration
- Two Photographs of Each Partner
- PAN Card Copy of Partners
- Identity Proof (Voter ID / Driving License / Passport)
- Address Proof (Bank Statement / Electricity, Mobile, Telephone Bill)
- Proof of Registered Office
- Utility Bill as Proof of Registered Address
- NOC from the Owner of the Premises
Frequently Asked Questions
To start a partnership firm, the minimum number of partners is two, whereas the maximum number of partners can be 20. The partners must come together to carry on any legal business with the motive of earning profits.
The Indian Partnership Act 1932 regulates all the partnership businesses in India. The Act prescribes the possibility of two types of partnership firms: unregistered firm, and registered firm. One can form an unregistered firm by entering into an agreement between two competent persons, known as partners, where they do not register the firm with the Registrar of Firms. When you subsequently register the firm by submitting the copy of the partnership deed, KYC of partners, and the registered office is known as the Registered Partnership Firm.
Though the Indian Partnership Act, 1932 does not make registration of partnership mandatory, Section 69 places certain disadvantages to an unregistered firm. Following are the disadvantages of an unregistered firm.
- Only a registered partnership firm can claim a setoff
- An unregistered partnership cannot recover any sum due from third parties if the amount in question is more than Rs. 100/-
- Only a registered partnership firm can file a legal suit in the court of law for the enforcement of rights against partners.
- The partners of an unregistered firm cannot file suit against another partner of the firm or the firm itself.
Hence, we strongly advise registering the partnership firm. You can register an unregistered firm at any time. The office of the Registrar of Firms is set up by every state government. It is vested with the power to register the firm, issue the Certificate of Registration of the Firm, and a copy of the extracts of the register of firms where they enter the partnership name.
You need to file the application for registration of partnership firm with the Registrar of Firms having jurisdiction over the place of business of the partnership firm. The registrar of firms, after receipt of the application complete in all aspects with all required documents, registers the firm within 1-2 weeks and issues the Certificate of Registration of Firm.
The law does not provide any specific format for the partnership deed, it is up to the partners what they agree and reduces in writing at the time of starting their partnership firm. The partnership once entered can be changed any number of times. However, each amendment of the deed must be filed with the registrar for its registration. Below is the list of items that should form part of the agreement.
- The main object and activities of the Firm
- The effective date of the firm
- The duration of the Partnership Firm
- The clause relating Capital Contribution
- Profit sharing ratio of the partners
- Management and Administration of Partnership Firm
- How to resolve disputes
- The deed must be signed before two witnesses
- The deed should be notarized
Yes, a partnership firm can be converted easily into a Limited Liability Partnership or a Private Limited Company. The partnership is an old method of doing business; we always recommend to start a business in the Private Limited form
Unlike Limited Company or LLP, there is no need to file the annual return for a partnership firm. However, income Tax Return shall be necessary to be submitted at the end of the financial year and within Due Date of filing. There is no provision of audit under the partnership, Act hence a firm does not require to get its books audited. However, if the turnover crosses 2 Crore, then tax audit is mandatory.