What is Partnership Firm?
Partnership Firm is the most suitable type of business structure as it is very easy to form and a minimum of two people are required to form a Partnership Firm online. In Partnership firm, there are very minimal compliances in comparison to other business entities. In simplified language, we can say that partnership creates a relationship between two or more people who have agreed to carry on a business for profit and these people are known as partners.
Enterslice is India's leading platform in providing legal professional services through an online platform and our team of professionals can make the Partnership Firm Registration process quick and hassle-free.
What is Partnership Firm Registration?
To setup, a Partnership Firm in India, partnership firm registration is not necessary however it is always advisable to register a partnership firm to avail the legal benefits which cannot be availed in case partnership firm is not registered. Partnership Firm registration is the complete discretion of partners. Enterslice can help you in partnership firm registration in India; for this, you just need to provide certain documents such as documents related to place of the firm, documents related to partner for identification, the motive of setting up partnership firm, profit sharing ratio and duration of the partnership.
What are the features of Partnership Firm Registration in India?
It is good to form partnership Firm in India, because of the following below mentioned features:
- Minimum two persons are required
- Responsibilities and duties are shared among the partners of the Company
- Easy to set-up as partnership firm registration is optional
- Minimal legal formalities
- Fewer Compliances
- A minor cannot become a partner
- Flexibility in decision making
- Inexpensive to establish
What will be the consequences if the Partnership Firm is not registered?
Without Partnership Firm registration, a partner cannot enforce its rights given under Indian Partnership Act, 1932. In case of dispute with the third party, the firm cannot claim for setoff however the third party will be able to sue the Partnership Firm.
What must be considered while selecting a name of the Partnership Firm?
Following below-mentioned conditions must be considered while selecting a name of the Partnership Firm prior to the Partnership Firm Registration online in India:
- The name of the partnership firm must not be identical to an existing firm which is involved in the same type of business.
- In the name of the Partnership Firm, there should not be words such as emperor, crown, empire or any other type of word which requires prior approval of the government.
How will an agreement be formed among the partners of the Partnership Firm?
The agreement is formed among the partners in the form of Partnership Deed which contains and defines the rights, duties, profit sharing ratio and other obligations of each partner. It can either be written or oral agreement, although it is always recommendable to form a partnership deed to avoid any future conflicts among partners.
What are the main components of the Partnership Deed?
Below mentioned components must be considered while drafting partnership deed:
- Detail of the firm and its partners such as name and address
- Nature of the Partnership Firm
- Detail of capital contributed by each partner
- Profit/loss sharing ratio among the partners
- Interest on capital invested
- Detail of drawings by partners or loans provided by partners
- Salaries, commissions or any other amount to be payable to partners
- Rights and duties/obligation of each Partner
- A process which will be followed in case of retirement or death of any partner
- Other mutually decided clauses
For Partnership registration in India, partnership deed must be duly stamped and notarized. We have a team of professionals who can draft your partnership deed in a very experienced manner.
How much stamp duty will be paid on Partnership Deed?
We cannot say how much stamp duty will be paid on partnership deed as it varies from state to state on the basis of the capital of the firm.
What are the documents required for Partnership Firm registration in India?
Following below-mentioned documents will be required for partnership firm registration in India:
- Partnership Firm registration application in Form 1
- Certified Copy of notarized Partnership Deed on stamp paper
- Specimen of Affidavit
- Ownership documents in case property are owned.
- If the property is on rent then rental agreement as a proof of principal place of business
- ID Proof and address proof of all the partners (PAN/ Aadhar Card/ Driving License/ Copy of voter ID/ Passport)
What is the Procedure for Registration of Partnership Firm in India?
For online registration of Partnership Firm in India, an application form is filed with the registrar of firms of the state where the firm is situated along with the prescribed fees. The partnership firm registration application form must be signed by all partners or their agents. Thereafter Partnership Deed is created on stamp paper and which should be signed by all the partners with notarization.
After verification of the prescribed documents, if the registrar is satisfied then he will register the partnership firm in Register of Firms and issue Certificate of Registration. Up to date information of all the firms is contained under the Register of Firms and on the payment of the certain fees it can be viewed by anybody.
What will be the Step by Step Procedure for Online Registration of Partnership Firm in India?
- Selection of Partnership Firm Name
The first step is to select the name of the partnership firm and make sure that name is not infringing on the existing trademark. For this, you can verify it through the website of IP India online. After this, you would have to check the name availability of the firm on the website of MCA (Ministry of Corporate Affairs) and it should be as per the guidelines prescribed by the government.
- Creation of Partnership Deed
The next step is to create a Partnership Deed which is an agreement among the partners consisting of terms & conditions. Partnership deed must be executed on stamp paper and it should be properly notarized.
It will contain the following information:
- Partnership Firm Name
- Address of the Partnership Firm
- Nature/description of the firm
- Profit sharing ratio of all the existing partners
- Details of all the partners
- Details of capital contribution
Besides this, there will be clauses related to admission, retirement or death of the partner.
- Partnership Firm Registration
The last step in connection with partnership firm registration is the filing of an application in Prescribed form as per the state laws along with the necessary documents such as an affidavit, partnership deed and proof of principal place of business. After submission of an application it shall be verified by the registrar and after satisfaction, it will record the partnership firm in its database.
How Enterslice will help you in Partnership Firm registration in India?
Enterslice is a leading platform which provides all type of legal compliance services in all over India and in more than 22 countries. You just have to go through the following below mentioned steps in order to get your partnership firm registration in India:
- First provide us your basic details such as name, Email Id & Mobile No on our website (Enterslice - Partnership Firm) and then – Click on Get Started button.
- After this, wait for a Call back by an expert or directly pay online if you are clear about the Partnership Firm Registration process.
- Within 4 to 8 Working hours, our expert will call you back and assist you however in case of further queries someone from senior management will speak with you on Skype. You can also drop an email to email@example.com.
- After understanding the structure of your proposed partnership firm, a team of Enterslice will share a detailed checklist of documents required from your end for further action.
- After this, you will receive a unique order Number to track the progress of the assignment.
- You can upload documents through a mobile application (Enterslice Mobile app is available on Google Play Store for Android users and on Apple App Store for iOS users). You can also email your documents to firstname.lastname@example.org
- Thereafter we will assign your order of Partnership firm registration to our team of professionals.
- You can track the status of your order on our website or by using Mobile App.
- We will send you regular updates via email about the work progress
- Our team will handle end to end process in Partnership Firm Registration such as Filling of the application form, drafting of partnership deed, notary & stamping and filing of PAN application.
- For Order status, please write us on email@example.com and for Feedbacks/Complaints you can write us on firstname.lastname@example.org.
What will be the mandatory compliances for Partnership Firm in India?
In a simplified language, compliance implies conforming a rule, policy, standard or law. Compliances are very important as it makes a business structure to work in line in accordance with the law. Timely Compliances ensure that business is functioning in conformity with the law and reduce the penalty.
Now, let’s understand the basic compliances for Registration of Partnership Firm in India:
|Partnership Firm Registration||Form I|
|Change in Partnership Firm in terms of name/ principal place of business/ nature of the business||Form II (within 90 days)|
|For Branch Opening and Closing||Form III (within 90 days)|
|Change in the Details of Partners||Form IV (Within 90 days)|
|Change in Constitution or Dissolution||Form V (Within 90 days)|
|In case minor becomes major and wants to become a partner||Form VI (Within 90days)|
It is required for Partnership Firm in India to file their annual tax return with the Income Tax Department. Other tax compliances may also be required from time to time.
However, unlike LLP (Limited Liability Partnership) / Company, it is not required for partnership firm to file its annual accounts with the Registrar of Companies each year. It is also not necessary to prepare audited financial statements each year. In spite of that tax-audit may be necessary on the basis of turnover.
For the purpose of taxation, Partnership Firm is considered as a separate legal entity. Therefore Partnership firms taxed under the income tax slab for firms and partners are taxed as individuals.
Filing of Return of Income
Partnership Firm has to file a return of income irrespective of the revenue or loss. A return can be filed in ITR 5.
ITR 5 is for persons other than:
- Company and
- Person filing Form ITR-7.
For Partnership Firm in India, it is mandatory to file a return of income electronically with or without digital signature. Return of income may also be filed under Electronic Verification Code. Whereas in case Partnership Firm is liable to get its accounts audited under Section 44AB then it is mandatory to furnish a return of income electronically with a digital signature.
In the following below mentioned ways, return forms can be filed with the Income Tax Department:
- Return can be manually furnished in paper form;
- Return can also be furnished electronically under digital signature;
- Through data transmission in the return electronically under electronic verification code;
- Through data transmission in the return electronically and thereafter submits the verification of the return in Form ITR-V.
Due Dates for Filing Income Tax Return
The due date will be 30th September of the assessment year for a partnership firm who is required to get its accounts audited under the Income Tax Act, 1961 or under any other law. The due date will be 31st July in any other case.
In the upcoming years more compliance requirements can be imposed on partnership firms in order to make it a more efficient structure. Currently, for partnership firms, there are very minimal compliances.
What are the Tax compliances for Partnership Firm in India?
It is mandatory for partnership firms in India to obtain Permanent Account Number and Tax Deduction Account Number from the Income Tax Department after Partnership Firm Registration.
- Income Tax Rate in case of Partnership Firm
In the case of a partnership firm, the income tax rate on the total income will be 30% and surcharge on income tax.
Income Tax in case of partnership firm whose total income exceeds Rs. 1 Crore will be computed in accordance with the section 111A or section 112 of the Income Tax Act, 1961. Income tax can be paid by the following modes:
- Physical Mode – Payment can be made by furnishing the hard copy of challan at the designated bank, i.e., Challan ITNS 280.
- E-Payment mode – Payment can also be made through electronic mode.
Note: For a partnership firm who is liable to get its accounts audited, has to make payment through electronic mode only.
What are the Post Partnership Firm Registration Requirements?
Once the Partnership Firm registration is completed, you have to take the necessary steps in order to make a strong place in the industry. There are some steps which need to be taken prior to the handling of activities, like bank account opening to take care of all the activities, GST registration, and intellectual property registration, drafting of documents and printing of stationery. Nonfulfillment of mandatory requirements may lead to bear the penalties by the firm.
- Bank Account Opening
First, you have to open a bank account on the name of the partnership firm within 30 days of the partnership firm registration to keep the track record of all the transactions of the firm. For bank account opening you would have to submit PAN and other documents as required by the bank.
- Intellectual Property Registration
Intellectual property registration gives protection to the trademark and patent from infringement and duplication. With this, competitors cannot affect your brand and market value. Logo provides the protection under Trade Marks Act.
- Drafting Documents
The growth of the firm depends upon standardized policies and procedures. The partnership firm shall set up policies and enter into certain agreements on the basis of its structure.
Next step is printing of stationery such as billheads and letterheads consisting name of the firm.
Can I change the name of my Partnership Firm after Partnership Firm Registration?
Yes, you can change the name of your firm at any time after partnership firm registration according to the Indian Partnership Act, 1932. For this purpose, Form II is required to be filed with the Registrar of Firms. In order to change the name of the firm, you have to take the following below mentioned steps:
- Create a new partnership deed;
- Submission of Form II along with the prescribed fees and below mentioned documents;
- Duly attested and notarized old partnership deed
- Duly attested and notarized new partnership deed
- ID proof and residential proof of all the partners
- Passport size photograph of all the partners.
- Copy of incorporation certificate
Once the form is submitted with the registrar of the firm along with the attached documents, the registrar will scrutiny all the necessary documents and after full verification fresh certificate of Incorporation will be issued.
How Can I convert my Partnership Firm in Limited Liability Partnership (LLP) or Private Limited Company?
Partnership Firms in India Can be converted into LLP or Private Limited Company to avoid the risk which brings along with Partnership Firm.
- For Conversion of Partnership Firm into LLP
Obtain DSC (Digital Signature Certificate) for all the partners who intend to become partners in LLP.
In order to proceed with conversion, the next step is to obtain DPIN (Designated Partnership Identification Number) for the minimum two partners.
In the next step, you have to apply for the name of LLP by filing prescribed form.
After this, you have to file Form 17, Form 2 and Form 3 along with the documents mentioned below:
- Registered Office Proof
- Details of Proposed partners
- Copy of Income-tax Return Filing
- NOC from Income Tax authorities
- Consent of creditors
After the filing of required forms, documents will be scrutinized by the government and certificate of incorporation will be issued.
- For the Conversion of Partnership Firm into Private Limited Company
For Private Limited Company, there is a requirement of a minimum of two directors and a minimum of two shareholders.
Obtain DSC (Digital Signature Certificate) for all the partners who intend to become directors in the company.
In order to proceed with conversion, the next step is to obtain DIN (Director Identification Number), for which application can be filed directly through incorporation form SPICE.
In the next step, you have to apply for the name of Company by filing prescribed RUN Form.
After this, you have to draft the memorandum of association & article of association and file Form 18 along with the documents mentioned below:
- Registered Office Proof
- Identity Proof of Proposed Directors
- NOC from Landlord
After the filing of required forms, documents will be scrutinized by the registrar of companies and certificate of incorporation will be issued.
If you still have confusion in the conversion process, then we can help you. For this, you just need to drop a query on our website. We can complete the process smoothly.
What are the forms required to be filed in case of a change in the Partnership Firm such as a change in the place of business/resignation or cessation of partner?
If you want to make any change in your partnership firm then you have to amend the partnership deed. At the time of carrying operation in a Partnership Firm, the following circumstances may arise:
- Change in the place of business
- Change in the name of the firm
- Resignation or Cessation of Partner
- Change in the details of partners
In such cases, partners have to intimate registrar of firms about changes in Partnership Firm by submitting the requisite form along with the new partnership deed.
|Form 2||For change in the place of business and name of the partnership firm|
|Form 3||For changes other than the place of business|
|Form 4||For change in the details of partners|
|Form 5||For change in constitution and retirement of a partner|
|Form 6||For dissolution of Partnership Firm|
|Form 7||In case minor become major|
Comparison Chart among Partnership Firm, LLP and Company
|Investment||Cannot subscribe to the share ofother company||Can subscribe to the shares ofthe company||Can subscribe to the shares ofthe company|
|Legal Action||Can sue the third party if registered and can be sued even ifunregistered.||It is a legal entity and can sue thethird party or can be sued.||It is a legal entity and can sue thethird party or can be sued.|
|Finance||Not easy to obtain finance||No finance protection as registration of charges is not available||Easily obtain finance due to fullprotection|
|Compliances||Less compliances||Less Compliances||More Compliances|
|FDI (Foreign Direct Investment)||NRIs Can invest on non-repatriationbasis otherwise RBI permission isrequired||100% FDI is allowed in specified sectors through automatic route||100% FDI is allowed in specified sectors through automatic route|