Understanding a Partnership Firm

“Partnership” refers to the relationship between two or more individuals who have mutually agreed to share the profits generated by a business venture conducted collectively or by any one of them acting on behalf of all. This agreement is formalized through a document known as the Partnership Deed, which outlines the roles, responsibilities, and profit-sharing arrangements of each partner. Individuals who have consented to form a partnership are referred to as “partners,” and collectively they constitute a “firm.” Within a partnership, risks and responsibilities are distributed among the partners.

Partnerships in India are regulated by the Indian Partnership Act of 1932. This legislation defines the framework of a Partnership Firm by outlining all the necessary provisions for its operation. The Act recognizes both registered and unregistered partnership firms in India, providing legal validity to their operations and agreements.

Advantages of Establishing a Partnership Firm

Advantages of Establishing a Partnership Firm:

1. Easy to Start: Forming a Partnership Firm involves minimal formalities and is relatively easy to establish compared to other business structures, making it accessible for entrepreneurs.
2. Minimal Regulatory Compliance: Partnership Firms typically have fewer regulatory and compliance requirements compared to corporations, reducing administrative burdens and operational complexities.
3. Operating Flexibility for Partners: Partnerships offer flexibility in decision-making, management, and operations, allowing partners to adapt quickly to changing market conditions and business needs.
4. Various Financial Returns for the Partners: Partners in a Partnership Firm have the opportunity to share profits and losses based on the terms outlined in the partnership agreement. This allows for various financial returns based on the individual contributions and efforts of each partner.

Requirements for Establishing a Partnership Firm

To form a PartnershipFirm will require the following.

1. Minimum 2 Partners: A Partnership Firm must have at least two partners to be formed.
2. No Capital Requirement: There is no minimum capital requirement for forming a Partnership Firm.

Step-by-Step Guide to Registering a Partnership Firm

Ensure to follow all guidelines and regulations prescribed by the concerned authority throughout the registration process.

• Step 1 Submit all the required documents: Gather and submit all necessary documents as per the requirements of the concerned authority.
• Step 2 Drafting a Partnership Deed: Prepare a Partnership Deed outlining the terms and conditions of the partnership agreement, including details about partners, profit-sharing ratios, capital contribution, etc.
• Step 3 Payment of Stamp Duty on Deed: Pay the requisite stamp duty as per the Stamp Act, based on the value of the partnership deed.
• Step 4 Notarisation of Partnership Deed: Get the Partnership Deed notarized by a notary public to make it legally valid and enforceable.
• Step 5 Apply for PAN and TAN of the Firm: Apply for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the partnership firm through the NSDL portal.
• Step 6 Certificate of Registration from RoF: Obtain the Certificate of Registration from the Registrar of Firms (RoF) after verifying and approving all submitted documents and the partnership deed.
• Step 7 Open a Current Bank account on the Firm’s name: Utilize the Certificate of Registration and other relevant documents to open a current bank account in the name of the partnership firm.

Documents Needed for Registering a Partnership Firm

Listed below are the documents that are required for registering a Partnership Firm

Identity & Address Proof of Partners:

1. Copy of Pan Card of Partners (mandatory)
2. Aadhaar Card, Voter ID Card, Driving License, or Passport
3. Any one of: Bank Statement, Electricity Bill, or Mobile Bill (not older than 2 months)
4. Passport Size Photograph of Partners

Proof of Registered Office (any one):

1. Conveyance/Lease Deed/Rent Agreement, etc., along with rent receipts (any one)
2. Copy of utility bills (Telephone/Gas/Electricity bill) (not older than two months) (any one)

Documents Required for Partnership Registration:

1. Form No. 1 (Application for registration under Partnership Act)
2. Original copy of Partnership Deed, signed by all Partners
3. Affidavit declaring intention to become Partner
4. Rental or lease agreement of the property/campus on which the business is estabilished