Partnership Firm

A Partnership Firm is a business structure where two or more individuals join hands to operate a business and share profits as per an agreed ratio. It is governed by the Indian Partnership Act, 1932. This business model is popular for small to medium enterprises due to its ease of formation and operational flexibility.

Partnership Firm Registration - Advantages

Minimum Compliance

A partnership has very little regulatory compliance. For general partnerships, there is no need to appoint an auditor. There is no requirement for annual accounts filing with the registrar. A partnership may be unregistered, but it may get registered to avail the legal benefits. Even the annual compliances are lower when compared to an LLP.

Simple To Start

A partnership firm can be formed within 2-4 business days, with an unregistered deed of partnership. However, registering the partnership firm will enable the firm to avail legal benefits.

Comparatively Economical

A general partnership is substantially less expensive to start than an LLP. It will still be cost-effective in the long term because the compliance needs are less.

Partnership Firm Registration - Disadvantages

Unlimited Liability

The biggest disadvantage of the partnership firm is that it renders unlimited liability to its partners. The partners have to bear the loss of the firm out of their personal assets. On the other hand, in a company or LLP, the shareholders or partners have liability limited to the extent of their shares. The liability created by one partner of the partnership firm is to be borne by all the partners of the firm. If the firm's assets are insufficient to pay the debt, then the partners will be liable to repay the debts personally. This makes the partnership business risky.

No Perpetual Succession

The partnership firm does not have perpetual succession unlike a company or LLP. This means that a partnership firm will come to an end upon the death of a partner or insolvency of all the partners. It may also be dissolved if a partner gives notice of dissolution of the firm to the other partners. Thus, the life of a partnership firm is uncertain. This can create uncertainty and instability for the remaining partners as well as for the employees and customers of the firm.

Limited Resources

The maximum number of partners in a partnership firm is 20. This limit in the number of members restricts the total capital contribution in the firm. The capital of the firm is the sum total of the amount invested by each partner. Thus, if the total investment runs low, it will be difficult for the partnership firm to scale up and take on larger ventures.

Difficult to Raise Funds

Since the partnership firm does not have perpetual succession and a separate legal entity, it is difficult to raise funds. The firm does not have many options for raising capital and growing its business as compared to a company or LLP. As there are no strict legal compliances, people have less trust in the firm. The accounts of the firm need not be published. Thus, it makes it difficult to finance from third parties.

Documents Required For the Registration Of A Partnership

Following are the documents required for Registration of Partnership Firm:

• Application for registration of partnership (Form 1)
• Certified original copy of partnership deed
• Specimen of an affidavit certifying all the details mentioned in the partnership deed are correct
• PAN card and address proof of the partners
• Copy of Registered Office Address
• ID Proof of all partners

Timeframe For Partnership Firm Registration In India

The time taken for incorporation of Partnership Firm is about 10 to 15 days. The time varies from state to state and also depends on the time taken by governmental bodies involved in approval of filings.

Partnership Firm Registration Fees In India

The Partnership Firm Registration Fees ranges from Rs. 3500 to Rs. 7500. Amount varies on a number of factors like the state where it is to be formed and other changes in Governmental fees charges.

The Partnership Firm Registration process involves the following steps.

Step 1: Choose the name for the firm : The first step is to select a name that does not resemble the name of any other existing firm

Step 2: Draft a Partnership Deed : The partnership deed is the most important document for the registration of the company as it gives the following necessary information to the Registrar

• Name of the partners
• Address of company
• Contact details of partners
• Nature of the business
• Duration of the partnership
• Profit/Loss ratio
• Capital Contribution of the partners

Step 3: Apply for a PAN Card of the firm : A firm respective of registration under the Act, is required to mandatorily apply for a Permanent Account Number to the Income Tax Department. This can be applied on the basis of a current account opened in the firm.

Step 4: File a Registration Application : Next step is to file a registration application mentioning all the relevant details regarding the business. This is to be submitted to the Registrar in the region of the firm's registered office.

Step 5: Submission of Necessary Documents : Along with the registration application, the following documents are to be submitted to the Registrar:

• Application for registration of partnership (Form 1)
• A certified original copy of partnership deed
• Specimen of Affidavit
• PAN Card in the name of partnership firm
• Proof of address of the firm, ownership deed, lease and rent agreements, etc.
• PAN cards and address proofs of all the partners

Step 6: Pay the Fees & Stamp duties : A registration fee and a stamp duty are required to be paid at the time of the submission of the documents with the Registrar. The fees may vary across states.

Step 7: Deed Finalization : To legalize the Deed it should be shared with each partner in a written form on a stamp paper. One stamp paper deed should be duly signed by all the partners in front of the notary The value of the stamp vanes across states. The signed copy is then submitted to the Registrar

Step 8: Issuance of Certificate from the Registrar :  The registrar after complete verification will issue the registration certificate

The firm will thus be on record in the Register of Firms On the date of this entry the firm shall be deemed registered.