Partnership Firm

One of the most significant types of commercial organisations is a partnership firm. In India, this type of corporate structure is very common. The Indian Partnership Act (1932) (henceforth referred to as the Act) describes a partnership as “the relation between two or more persons who have agreed to share the profits of a business carried on by all or any of them acting for all” in the context of India's corporate structure. 

Before the enactment of the Indian Law of Partnership, business partner conflicts were resolved by Indian courts using the widespread customs and usages of the time.  Lawgical Adda is here to make you understand the procedure for registration of partnership in India:

How does Partnership Registration work?

Registration of a partnership refers to the members' registration of the partnership firm with the Registrar of Firms. It is recommended that the partners register their firm with the state's Registrar of Firms. Since forming a partnership firm is not required, the partners may choose to register the firm at any point while it exists or at any point after.

To register a partnership, two or more individuals must join as partners, decide on a formal name, and sign a partnership deed. Partners, however, are not permitted to be husband and wife or members of a Hindu undivided family. 

Documents Required for Partnership Firm Registration

The extremely crucial documents listed below are needed in order to register a partnership firm in India:

1. A completed Form-1 Application for Registration (in two sets, duly signed by each partner and attested by a Notary, Advocate, Company Secretary, or Chartered Accountant);

2. A Partnership Deed (True copies in two sets, signed by a registered deed writer, advocate, company secretary, chartered accountant, or notary as "drafted by me");

3. An address verification (self-attested copies of each partner's PAN and Aadhaar card);

4. Make sure the appropriate stamp duty is paid ad valorem on rent and advance specified in the rental/lease agreement, as well as the principal place proof of the firm's activity (the lease/rental agreement or ownership documents); and

5. An affidavit sample attesting to the accuracy of all the information included in the partnership deed and related documents (as required in a few states);

Steps for Registering a Partnership in India

Select a partnership name

A company should choose a name distinct from any already-publicly-known entity's name or passable imitation. A partnership name shouldn't be the same as or similar to an already-existing business engaged in the same activity. The Ministry of Corporate Affairs website is where the applicant can verify the legality of their chosen name.

Create a Partnership Deed.

The partnership deed is the most crucial document for the firm’s registration because it gives the registrar the following essential data:

• The company's name, address, and those of each partner
• Partners' contact information
• Type of business 
• Duration of the partnership 
• Ratio of profit-to-loss sharing
• Regulations pertaining to the firm's solvency
• Details about the capital that each partner will contribute

The Deed also details partner responsibilities, audit procedures, other matters, and the compensation due to partners over and beyond profit shares.

Use the partnership name when applying for a PAN card.

A company must apply to the Income Tax Department for a Permanent Account Number, regardless of whether it is registered under the Act. This can be used with a current account under the company's name. To satisfy the tax payment obligation, the PAN is necessary.

Submit an Application for Registration of Partnership

A firm must submit information on the registration application, including the company's name, the type of business it conducts, its address, the names and addresses of each partner, and the date the business was founded.

Submit the Documents

As part of the partnership registration procedure, the Registrar must receive the following papers in addition to the registration application:

• Application for Partnership Registration (Form 1)
• A partnership firm-named PAN card specimen, a certified original copy of the partnership deed, and a specimen of the affidavit
• Commonly accepted documents include the partnership firm's proof of residence, ownership deeds, lease and rent agreements, etc.
• PAN cards and documentation of each partner's address

Pay Stamp Duties and Fees

When submitting the paperwork to the Registrar, a registration fee and a stamp duty must be paid. States have different fees. One must be aware that until all fees are paid, the registration of the partnership is not final.

Complete the Deed

The Deed must be given to each partner in writing on stamp paper in order for it to become legally binding. Each partner must properly sign one stamp paper deed in front of the notary. The stamp has different values in each state. After that, the signed copy is turned in to the Registrar to complete the partnership registration procedure.

The Registrar's Certification

A registration certificate will be issued by the registrar following a careful review of the paperwork.

Thus, the company will be included in the Register of Firms. The firm is considered registered as of the date of this entry. From the date of registration, the partnership firm must follow its name with "(Registered)".

Why should you register your partnership firm?

It is not necessary to register a partnership firm in accordance with the terms of the Indian Partnership Act, 1932.  The partners will decide on that. 

Nonetheless, it is always a good idea to register the partnership business because unregistered businesses lack some of the unique rights and advantages that registered businesses have. 

Incorporating greater skills, cash, and risk sharing into a partnership firm is an advantage over a proprietary corporation. Additionally, compared to a company, partnerships offer simple processes and low compliance, making them a feasible choice for small and medium-sized businesses. Among its main advantages are:

• In a partnership firm, the partners share the risk, whereas an individual in a private firm may have unlimited responsibility.
• The primary advantage of registering a partnership in India is that a partner can sue the other partners in the event of a dispute between or among the partners.
• Additionally, the Partnership business can pursue its claim by suing third parties as a result of registration.
• For a registered partnership firm, the dissolution process is dependable and efficient.

Pro tip: If there is a legal issue, the court will first determine whether the incorporation is registered. As a result, registering the partnership under the Act is advised.