Wednesday, May 6, 2020

How do I register a Partnership firm - Benefits and Drawbacks of Firms

In this blog we will understand that how will you make a partnership deed and what content should be put in the deed. What is the benefits and Drawbacks of the Partnership firm. Which documents are required to get registered under the registrar? 
How do I register a partnership firm
How to register a partnership firm

What is a Partnership firm?

A partnership firm is an organization formed jointly by two or more individuals to run a business to make a profit and distribute it in a fixed sharing ratio. Each member of such a group is known as a partner and collectively as a partnership firm. Firms in India governed by the Partnership Act, 1932

Content of Partnership Deed

For getting register a partnership firm first step is to make a partnership deed under which all rules which is fixed by commonly by all partners is to be mentioned here. Lets understand which section is required to mention in the deed.

1. Firm Name - At first name of the partnership firm should be mentioned in the deed.

2. Object - What is the object of firm or why this firm is formed.

3. Place of business - You should mention the place of business at which you are willing to run your partnership firm. It may be on rented or on self-ownership. 

Registration fees for registration of partnership firm
Registration fees for partnership firm
4. Name and address of partners - You have to mention about all partners. The name of partners and their addresses should be mentioned here.

5. Date of Commencement - You should mention the date of commencement of the business in this section. You must ensure that the date of the commercial activity would be later from this date.

6. Duration of partnership - You must mention a duration till this partnership deed will enforceable. If no such duration mentioned here then it would be deemed on the basis of the willingness of all partners. Hence it is recommended to mention duration to protect themselves from any legal consequences.

For e.g - Deed shall be enforceable upto completion of this road.
                Deed shall be enforceable as per their will.
                Deed shall be enforceable for 5 years.

7. Capital Contribution - Capital contribution of all partners with their name should be mention in this section.

8. Profit-Sharing ratio - In this section profit sharing ratio should be mention.

9. Interest on capital to partners - If any interest payable on partners capital you can mention in this section.

10. Interest on Drawings - It is better to mention if interest chargeable on drawings. The rate of interest should be mentioned here.

11. Salary, Commission to partners - To escape from any legal consequences it is better to mention about salary or commission if any payable to partners. Salary can be on a monthly basis or yearly basis

12. Responsibility and duties of partners - In this section, you must clearly be specified what is the duties of the partner and which partner is responsible for which task.

13. Operation of bank accounts - This section is very important to get loan from bank. You must specify that who is responsible to sign on documents of the bank. You must clearly specify name of the partner and his responsibility regarding signature in bank documents. This would be beneficial for getting easily sanction of the loan.

14. Power to borrow loans - You must specify that this firm can take loan from bank and also specify a maximum limit of loan that can be taken by firm.

15. Rules of death, Retirement or admission of the new partner - It must be clear about rules, in case of any death who will be the legal heir. Whether this legal heir is also responsible for any liability. Further what will be the conditions for the admission of any new partner.

Partnership deed also must specify rules about retirement. Example- In the case of retirement how to calculate his profit and remaining capital which he wants to withdraw etc.

16. All partners must be signed in the partnership deed.

17. The last page of the deed must be signed by two witnesses at least.

Can also read - How to register Pvt. Ltd. Co.

Whether a firm should be registered and who will do registration?

Whether a firm should be registered?

It is highly recommended to register the firm reason being if deed gets registered then firm can go to court for any legal remedy. e.g If someone not making payment to firm then the firm can file suit against in court. 

Who can do registration of the firm?

Every state has its separate registrar of firm to get registered and fees also vary from state to state.

List of documents required to get register of firm?

2. Affidavit about all information is true and fair.

3. Ownership proof e.g. Rent agreement if on rent

4. Residential proof of every partner.

After filling all the above documents to registrar your firm will be registered within 10-15 days. Now you can apply for PAN card and Bank Account.

What are the benefits of a partnership firm?

  • If you are working under a partnership firm then you don't need to generate Director Identification Number.
  • No audit is required below the threshold limit. But in a limited company audit is compulsory irrespective of the threshold limit.
  • No digital signature required for partners in the case of a partnership firm. As you might know that in the case of private or public company a digital signature is compulsorily required
  • Annual accounts are not required to file anywhere except Income tax. But in the case of Private or Public company annual filling is must to MCA and Income tax.
  • Profits are distributed amongst partners. In the case of company, profits can distribute only by the way of dividend distribution.
  • Compliance cost would be less in the partnership firm.
  • Bank loan can be easily taken in the case of a partnership firm rather compared to individual.
  • You can easily do wind up of partnership firm without any difficulty.

What is the limitation of a partnership firm

  • In case of partnership firm, investors would not willing to invest. Hence in case of requirement of the fund to grow business, it would be difficult to arrange the funds.
  • In case of partnership firm there are an unlimited liability of partners.

FAQ to form a partnership firm

Q1 - What is registration fees to get register as partnership firm

Ans - Every state has a different rate of registration. For e.g In haryana Rs.10 is charged as registration fees.

Q2 - Is registration for partnership is compulsory?

Ans - No, Registration of partnership is not compulsory. It is recommended.

Q3 - How can I register for partnership firm online in haryana?

Ans - As you might know every state has different procedure to register under firm. If you want to registe rin haryana you can visit here.

Q4 - Can you provide registration of partnership firm notes?

Ans - All information above given is itself  in a notes firm.

Do comment if any issue you are facing in registration and if you want to share some knowledge with others then do share.

Written by - Pankaj Kumar

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