Partnership Firm
Are you planning to form a partnership firm, then make sure to draft a partnership agreement that spells out how business decisions are made, conflicts are resolved, and buyouts are handled. If you have a disagreement with one of the partners, you'll be happy if you have this agreement. Let’s discuss in detail about incorporating partnership firms.
What is a Partnership Firm?
Being a popular sort of business constitution, Partnership Firm is a business form that is owned, managed, and controlled by an association of individuals for profit. These firms are relatively easy to start out and prevalent amongst small and medium-sized businesses within the unorganized sectors. Partnership Firms are fast losing their prevalence to the added advantages offered by a Limited Liability Partnership.
Partnership firms can be categorized in two ways, registered and un-registered Partnership firms. There is no compulsion to register a Partnership firm; however, it’s advisable to register a Partnership firm due to the added advantages. Partnership firms are created by drafting a Partnership deed amongst the Partners and Vireza Onfiling can help you to start a registered or unregistered Partnership firm in India.
What are the features of a Partnership Firm?
1. Minimum Two Person
Two-person are required to become partners of the firm. Maximum 20 partners are allowed in a firm and 10 in the banking business.
2. No FDI is allowed
In a partnership firm, foreign investment is not permissible. In the firm, only Indian citizens can become partners and can begin the partnership firm.
3. No Minimum Capital
No minimum capital is prescribed, it must be according to the business requirements. The Stamp Duty on the deed is predicated on the capital of the firm.
4. Unique Name
The name of the firm should be unique, and it should not be the same or similar to the name of any existing trademark which is registered or applied.
What are the Advantages of a partnership firm in India?
Easy Formation and Closer
Balanced decision Making
More funds availability due to multiple partners
Sharing of Risk
Benefits of Specialization
Balanced decision Making
More funds availability due to multiple partners
Sharing of Risk
Benefits of Specialization
What are the Disadvantages of partnership firms in India?
- Unlimited Liability
- Lack of Transparency
- Possibility of Conflicts if partnership deed is not well-drafted
What is the Partnership Registration Process in India?
SELECTION OF NAME
The first step is to select the name of the partnership firm that should be unique to avoid any infringement of somebody else Trademark or registered name.
DEED DRAFTING
The second step is to draft the Deed of Partnership which is known as the constitution of the firm which determines the relationship of partners among themselves as well as the relation of partners with the firm.
DEED NOTARY
The third step is to get the Partnership Deed signed and notarized from the nearby registrar of firms.
FIRM REGISTRATION
The signed partnership agreement including the KYC of partners and premises proof is filed with the concerned Registrar of Firms, for its registration. And after that physical verification of the document take place
What are the Common registration or licenses for partnership?
Shops & Establishment Registration
Every shop including commercial establishments is required to get establishment registration with the Labour Department within 30 days of starting their business. It is mandatory for all states in India.
Trade License
No one should be adversely affected by health hazards and nuisance by the improper carrying of trade. A License is necessary from the municipality within 30 days of starting the business.
Professional Tax Registration
Specific legislation has been passed by majority state governments to impose a tax on profession, employment of calling of any nature, however, and the fees for it is Rs. 2500 per annum.
Goods and Services Tax (GST)
GST Registration is mandatory for all businesses engaged in providing services or supply of products, where the turnover exceeds Rs. 20 Lac or does even one single transaction in interstate trade.
Food License / FSSAI Registration
During a business of producing, trading, storing, or dealing in any manner of food items, then the state level FSSAI registration or Central License is mandatory based on the turnover.
Drug License
This location-based Drug License is granted by the State Government based on fulfilling certain norms and criteria. No entity can start or continue the sale/trade of medicine without a drug license.
Private Security Agency License
Private Security Agency can be a lucrative business with immense potential, however, it can be started or continued only after obtaining a license from the competent authority as designated by the state government.
Import Export Code (IEC)
It is a ten-digit PAN-based registration with the DGFT. IEC is a mandatory prerequisite for starting a business of Import or Export in India. More than one IEC code is not issued against a pan.
Required Documents
| Acceptable Document | Document Type | Additional Details |
|---|---|---|
| Identity Proof of partners (Voter ID / Driving License/ Passport) | . | . |
| PAN Card and Aadhaar card Copy of Partners | . | . |
| Proof of Registered Office not older than 2 months ( (Electricity, Telephone Bill, Rent Agreement)) | . | . |
| Scanned Photograph of Each Partners | . | . |
| NOC from the owner of the premises | . | . |
| Address Proof of Partners (Bank Statement / Electricity, Mobile, Telephone Bill) | . | . |
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FAQs
You Ask, We Answer
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.
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.
Partners must be major (above the age of 18), should be sane and should not be disqualified by law from entering into a contract.
The Partnership Act does not prohibit a non-citizen from joining an Indian partnership firm, subject to necessary clearances and permissions from satisfactory authorities in this regard.
Capital is the initial amount in cash or kind contributed by the partners to start the business. It is not necessary for each partner to contribute equally to the capital. Contribution is based on the agreement between the parties.
The partnership business is regulated under Indian Partnership Act, 1932, which prescribes possibility of two types of the firm, unregistered firm, and registered firm. An unregistered firm is formed by entering into an agreement between two competent persons, known as partners, where the firm is not registered with the registrar of firms. Whereas the firms which subsequently get registered with the registrar of firms by submitting the copy of partnership deed and KYC of partners and the registered office is known as the Registered Partnership Firm.
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