The Buyt Desk
A partnership Firm needs less documentation for its formation and registration. The most important document which defines the partnership is the Partnership Deed.
In India, Partnership and Proprietorship are the 2 forms of organizations that are comparatively easy to set up as they need very less statutory compliance as compared to LLPs and companies. Hence these are the most popular forms that new entrepreneurs opt for to run their business.
How should a Partnership Firm be Named?
The name of the partnership firm can be anything as per the choice of the partners but should take care of a few things like
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The chosen name should be unique and not identical to the name of any other firm running a similar business. There should not be identical crises.
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The firm name is not allowed to have words like Emperor, Empire, Crown, Empress or words that imply the approval, sanction or patronage of the government.
How to draft a Partnership Deed?
A partnership deed is a legal document that states every member of a partnership’s rights and obligations. This deed can be oral or written but oral agreement is of no use when it comes to taxation. A written deed is necessary and its fundamental characteristics are
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Firm’s name and address
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Each partner’s name and address
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Nature of business under this partnership
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Firm’s Date of Commencement
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Term or duration of Partnership
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The capital amount put in by each partner
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The profit-sharing ratio between the partners
These are the bare minimum and must, partners can add more clauses as per the need so that role of every partner is clear and there are no conflicts among partners. Here are a few more –
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Interest in Partner’s Capital
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Partners’ Loan and interest to be charged on withdrawals
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Payable salaries and commissions to partners
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Accounts management and auditing
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Clear classification of each partner’s duties, powers and obligations
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Procedures to be followed on any partner’s retirement or death and admission of a partner
There can be many more clauses beyond these too. It all depends on the partners. Every rule they set to run the business can be added as a clause to the partnership deed. As per the Indian Stamp Act, select the needed stamp paper to put the Partnership Deed drafted by the partners on it. All partners are needed to sign the deed along with a minimum of two witnesses. If you want the firm to be registered, then file a copy of the partnership deed with the Registrar of Firms.
How to register a Partnership Firm?
In India, partnerships are administered by the Indian Partnership Act, 1932. According to this act, registration of partnership firms is not mandatory and is left to the will of partners. To enjoy the benefits of registered firms, it is necessary to register same. This can be done anytime during the lifetime of the partnership firm. Only registered partnership firms can file court cases. In India, a partnership firm’s registration is hassle-free. Find the Registrar of Firms of the area where the business is established and submit the application along with fees and supporting documents to register the firm. The supporting documents are
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Registration of Partnership application Form No. 1
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The Partnership Deed – certified copy
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Duly filled specimen of Affidavit
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Address proof of business location – Ownership document or rental/lease agreement
All the documents must be signed by all the partners. The registrar shall verify and record an entry of the statement in a register called the Register of Firm. Then the Certificate of Registration is issued. This is just the registration of the firm. Registration with the Income Tax Department is a must for every partnership firm and thus having a PAN Card in the firm’s name. Once a PAN Card is generated, the Partnership Firm can have a Current Account in the name of the Partnership Firm in any financial institute for day to day business operations.
