What Is The Partnership Firm Registration Process in India?

Partnership firms come to existence when two or more people agree to share profits and losses of the firm in a shared ratio and as per a signed agreement. There is less compliance to partnership firms as compared to other types of companies in India. Thus, this is one of the most preferred types of business entities in India. Establishing these firms is easy as it does not require a lot of documentation. All one needs is a partnership deed, and they are ready to proceed forward.

The Indian Partnership Act, 1932 regulates the registration and operational aspects of partnership firms in India. It is also not essential for partnership firms to register themselves with the Registrar. However, the registration of a partnership adds a level of legal security to the firm. This measure comes in handy during settlement claims internally amidst partners or with third parties.

Let's look at the partnership registration procedure coupled with some advantages and disadvantages of functioning as a partnership firm in India.

The process of Partnership firm registration in India

With the world shifting its base into the virtual realm, many Indian states have also switched their registration process to the online mode. If you plan to establish your firm in such Indian states, you can fill it online or continue following the offline procedure.

The online firm registration commences with an application to the Register of Firms. The steps in the registration process include:

1. Choose a name for your partnership firm:

Okay, so the most important step while registering your firm is to choose an appropriate name. It would be best if you avoided a name that is already prevailing in the market. The name should not be an imitation of any other firm or company's name in a similar business as the proposed partnership firm. The selection of such a pre-existing name could lead to the rejection of your firm registration application. Thus, choose something unique and apt to your business. You can check the availability of your partnership firm's name on the Ministry of Corporate Affairs official website.

2. Draft a partnership deed:

A partnership deed is absolutely essential. The deed has information regarding the partner's remuneration and profit-sharing ratio. It also covers details related to the responsibilities of every partner along with their rights in the firm. The data available in the deed helps the Registrar find all the necessary information.

Ideally, the partnership deed must slate out the following information, which is submitted to the Registrar of Firms:

• Name and address of the firm and all the partners in the Partnership firm.
• Type of the business the partnership firm is involved in.
• The sharing ratio of profit/ loss between all the partners of the firm.
• Contact details of all the partners.
• The duration of the partnership
• Rules of the solvency of the firm
• The capital contribution of each partner in the proposed partnership firm.

3. File for a PAN card in the name of the Partnership firm:

The Partnership firm needs a current bank account and a PAN (Permanent Account Number) in its name issued by the Income Tax Department. This step is a requisite to ensure payment of necessary tax liabilities as and when leviable.

4. File the registration application:

Once all the backend work of choosing a name, getting a bank account, PAN card, and drafting the partnership deed is complete, it's time to get in touch with the Registrar. This process could be done online or offline. This depends on the location of your company. You will have to check it before you apply. Fill the form with the Registrar either online or through offline mode. The application comprises general information regarding the partnership firm. It includes details such as the name of the firm, nature of your business, personal information of all the partners, and date of commencement of the entity.

5. Documents to be submitted along with the form:

Here's what you need to submit for Partnership firm registration:

• Application of registration of the partnership firm (Form 1)
• Original certified copy of the partnership deed
• A copy of the affidavit
• The PAN card of the partnership firm
• Address proof of the partnership firm. This proof could be an ownership deed, rent or lease agreement, or electricity bill.
• PAN cards and address proof of all the proposed partners.

6. Pay the fee and stamp duties:

The process of Partnership firm registration is incomplete without the payment of the dues. These fee and stamp duties change according to the place. You must pay these along with the submission of the entire documents. Once this is done, you can proceed forward to the subsequent step.

7. Authorize the deed:

To finalize the deed, each partner must sign the form on the stamp paper in front of the notary. The value of the stamp papers will differ from state to state.

8. Certification from the Registrar:

The Registrar will study your entire documents, and voila! He will grant you the certificate of Partnership firm registration. You can now officially add "registered" to your company's name.

Benefits of forming a partnership firm:

• Sharing of profits and losses: The profit and loss ratio is selected at the time of Partnership firm registration. This will reduce the burden of loss on one person and add a layer of protection to the firm. It also increases the accountability of every partner. The action or work that a particular partner does is specified right from the start.

• Enhanced decision making: Like everything, including the profit loss ratios, jobs, and actions of all the partners in the partnership firm is pre-specified, it streamlines the decision-making process of the firm.

• There is less compliance: Partnership firms don't need DSCs or DINs. There is less compliance. The partners can change or implement new rules in their firms easily.

• These are easy to establish: All you need is a partnership deed and sign a legitimate agreement to start your firm. A partnership is much easier to establish than most other types of business entities in India.

Downsides of forming a partnership firm:

• There is no possibility of succession: When it comes to LPPs and other companies, the firm can be passed on to the next successor upon the partner's death. However, this is not the case with Partnership firms. The firm dissolves once the partnership ends. It could be by the death of any partner or their insolvency.

• Difficult to raise funds: As the accounts of the partnership firms need not be published, third-party fund generation could be a problem.

• Limited access to resources: According to the Partnership Act, a firm can have at most 20 members. Thus, the scope of capital contribution gets restricted to the amount raised by the limited partners. It can become a hurdle when one wants to scale up their firm operations to take larger projects.

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If you are willing to register your partnership firm, we can guide you on the right track. At Gotaxfile, we can help you draft your partnership deed, filing for Partnership firm registration, and all the relevant compliances. After the firm's registration, you can also allocate your accounting and tax filing worries to our proficient team. We offer mentorship programs that will facilitate you along the way. Please browse through our website for more details related to our premier services. Visit us now!