Partnership Firm: Its Concept and Checklist for Registration

We can say that partnership firm basically establishes a relationship or association between two or more people who have agreed to carry on a business for the motive of earning a profit, and these people are known as the partners of the firm.

To start a Partnership Firm in India, obtaining partnership firm registration is not at all compulsory however it is always suitable to register a partnership firm so as become eligible for availing the legal benefits which cannot be availed in the case of non-registration. Hence, obtaining Partnership Firm registration is the complete its partner’s choice.

Features of a Partnership Firm Registration

Following are the features annexed with the concept of Partnership Firm Registration – 

1. Minimum two persons are required

2. Responsibilities and duties are shared among the firm partners 

3. Easy to start as obtaining partnership firm registration is optional

4. Minimal legal formalities

5. Fewer Compliances

6. A minor cannot become a partner

7. Flexibility in decision making

8. Inexpensive to establish

Advantages of a Partnership Firm

Following are the advantages annexed with the concept of a Partnership Firm – 

1. Easiest Business Structure

2. Easy in Decision Making

3. Raising Funds

4. Easy Management without any disputes

Consequences if a Partnership Firm is Not Registered

Without obtaining Partnership Firm registration, a partner is not eligible to enforce its rights provided under the Indian Partnership Act, 1932. In case of any dispute with the third party, the firm cannot ask for claim or setoff; however, the third party will be eligible to sue the concerned Partnership Firm. 

Main Components of a Partnership Deed

Following are the components that are must for drafting a Partnership Deed –

1. Basic details of both the firm and partners such as the name and address

2. Nature of the Partnership Firm

3. Detail of the amount of capital contributed by each Partner

4. Profit or loss sharing ratio among the partners

5. Interest on capital invested

6. Detail of the drawings by partners or the loans provided by partners

7. Salaries, commissions or any other type of amount payable to partners

8. Rights, duties or obligation of each Partner

9. A process which will be followed in the case of retirement or death of any partner

10. Other mutually decided clauses

Documents Required for Registration of a Partnership Firm

Following are the documents required for the registration of a Partnership Firm – 

1. Application for the Partnership Firm Registration in Form 1

2. Certified Copy of the notarized Partnership Deed on stamp paper

3. Specimen of Affidavit

4. Ownership documents in case the property is self owned

5. If the property being used is on rent then the rental agreement as a proof of principal place of Business

6. ID Proof and address proof of all the partners in the form of PAN Card, Aadhar Card,  Driving License, Copy of voter ID and Passport

Procedure for Obtaining Registration of a Partnership Firm

In India, for obtaining online registration of Partnership Firm, an application form is to be filed with the registrar of firms of the concerned state where the firm is located together with the submission of prescribed fees. Further, the application form for the partnership firm registration must be mandatorily signed by all partners or their agents. After that, the Partnership Deed is created on a notarized stamp paper, and which should also be signed by all the partners.

Further, after the due verification of the prescribed documents, if the registrar of the firm is satisfied, then he will register the concerned partnership firm in Register of Firms and will also issue a Certificate of Registration. Updated information of all the firms is mentioned in the Register of Firms and moreover, on the payment of the certain prescribed fees it can be viewed by anybody.

Tax Compliances for a Partnership Firm

In India, it is mandatory and compulsory for a partnership firm to obtain Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) from the Income Tax Department after Partnership Firm Registration.

Further, a Partnership Firm has to file an Income Tax Return irrespective of the revenue earned or loss incurred. Furthermore, in the case of a partnership firm, the income tax rate charged on the total income will be 30 per cent and surcharge on income tax.

Documents Required for opening a Current Bank Account

Following are the Documents which are required for the purpose of opening a Current Bank Account – 

1. Partnership deed

2. Partnership firm’s PAN card details

3. Address Proof of the partnership firm

4. Identity proofs of all the partners

5. Partnership firm registration certificate (if in case the concerned partnership has been registered)

6. Any registration document issued by the central or state government (normally GST (Goods and Service Tax) certificate is submitted)

7. Copy of the utility bill in the form of electricity bill, telephone bill or the water bill (not more than two months old)

8. Authorization letter on the letterhead of the firm authorizing one of its partners as the authorized signatory for the bank account.

Post Partnership Firm Registration Requirements 

Once the process for obtaining Partnership Firm registration is complete, all the partners of the concerned firm have to take the required steps in order to make a strong place in the industry. 

1. Opening of a Bank Account – First of the partners are required to open a bank account on the name of the partnership firm within a period of thirty days from the date of registration of the partnership firm. Further, for opening a bank account partners are required to submit PAN card details and other documents as required by the bank.

2. Intellectual Property Registration - Intellectual property registration provides protection to the trademark and patent from the infringement and duplication. With this, competitors cannot affect the concerned brand and market value. Moreover, the logo also provides protection under the Trade Marks Act.

3. Drafting Documents - The growth of a firm depends upon the standardized policies and procedures. Further, the partnership firm shall set up policies and also enter into certain agreements on the basis of its structure.

4. Printing of Stationary - The next step is the printing of stationery items such as the billheads and letterheads, comprising of the name of the firm.

GST Registration - GST Registration is needed for the Business whose annual turnover exceeds rupees forty Lakhs (rupees twenty Lakhs for the Northeastern states). Also, obtaining GST registration is mandatory and obligatory for particular businesses such as the Export-Import, E-commerce, and Market Place Aggregator.