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A partnership firm is one of the most traditional forms of a business registration. A Partnership firm is a business registered by two or more people come together to do a business and the person who agreed to share profits or loss in the entity. A partnership is a simple form of business registration for MSME enterprises in which two or more persons decides to start a business on profit or loss sharing basis. Partnership Act came into existence in India in the Year 1932, it’s a simple form of entity with very minimal compliances This is only form a registration available for partners to form at the initial stage, In the year 2010, The LLP act came into existence wherein Two or more persons can incorporate a LLP with limited liability.

What are the criteria’s to be followed in registering a partnership firm

How a name of the firm should be selected?

The name of the firm should be unique and should not be identical to a already existing firm in the same area of business, The name mustn’t have words of government departments, eminent leaders and name which require prior approval of the government.

How a deed/agreement between partners made?

Partnership deed is an agreement executed either registered or unregistered which lay down the percentage of investment, rights, obligations, and shares in profit of each partner is mentioned in it.A deed of partnership can either be word of mouth or written, Even though it is better to write a deed in order to avoid conflicts at the later stage.

Is it mandatory to register partnership?

Partnership can be either registered Partnership or unregistered Partnership. As per Indian Partnership Act, the only condition to commence a business as a partnership is the execution of Partnership Deed

There are fines or penalty for even if the firm is not registered, and partnership firms can be registered even after formation of firm or after few years of formation. But unregistered partnerships have certain limitations as compared to a registered partnership

Few of the limitations of an unregistered partnership are:

  • A partner cannot file any case in court against the firm or the other partner in case of any non fulfillment of the contract
  • An Unregistered partnership firm cannot file any case in the court of law against third party for his or her non fulfillment of contract.

What details and documents required to be provided for partnership deed?

  • Name of the Firm
  • Main business activity to be carried out.
  • Registered office address of the firm.
  • Name and address of each partners.
  • Total capital and capital to be invested by each partner.
  • Ratio of profit/loss sharing among the partners.
  • Interest on additional amount given by partner to firm or taken from firm by partner.
  • Salary payable to the working/active partner.
  • Copy of PAN and Aadhar of each partner
  • Copy of Electricity bill of premises along with rental agreement if taken on rent.

FAQ on Partnership Firm Registration

  • How many persons are required to form a partnership?
    Two or more person can form a partnership
  • What is the basic requirement to be a partner?
    The person who wants to be a partner needs to resident of India as well as Citizen of India, NRI or Foreigner cannot be a part of a partnership firm.
  • What is the advantage of registering a partnership firm?
    The firm or partner cannot file a suit in court against third part unless the firm is not registered.
  • Is it possible to transfer a partnership?
    No its not possible to transfer shares of partner to third party instead it can be given to the existing partners or any new partners which existing partners may decide.
  • Partnership is a Separate legal entity like company and LLP?
    No partnership is not a separate legal entity, The liability of the partners are unlimited
  • Is Auditing of Firm is mandatory?
    No, Auditing of a partnership firm is not mandatory unless it crosses the turnover limit specified for Tax audit.
  • Is it possible to convert a firm into any type of entity like LLP or Private limited?
    Yes, Its possible to convert a firm into Limited liability partnership or Private limited by following the procedures provide by the respective act.
  • How is it possible to End a partnership deed?
    If the partners of the firm wish to close the firm, They can close the firm by giving notice, if the dissolution of partnership is at will, It can be closed as per terms of closure mentioned in the deed of partnership.