Partnership and Proprietorship are the 2 most popular forms of business organisations in India. The reason why these 2 forms of organisations are so popular is because they are relatively easy to set-up and the no. of statutory compliance required to be done by these forms of organisations is relatively less than the statutory compliance applicable to LLP’s and Companies.
Choosing a Partnership Firm Name
The partners are free to choose any name as they desire for their partnership firm subject to the following rules:-
How to create a Partnership Deed?
The document in which the respective rights and obligations of the members of a partnership is written is called the Partnership Deed.
A partnership deed agreement may be written or oral. However, practically oral agreement does not have any value for tax purposes and therefore the partnership agreement should be written. The following are the essential characteristics of a partnership deed:-
The above are the minimum essentials which are required in all partnership deeds. The partners may also mention any additional clauses. Some of the examples of additional clauses which may be mentioned in the partnership deed are mentioned below:-
The Partnership Deed created by the partners should be on a stamp paper in accordance with the Indian
Stamp Act and each partner should have a copy of the partnership deed. A Copy of the Partnership Deed should also be filed with the Registrar of Firms in case the firm is being registered.
How to register a Partnership Firm in India
Partnerships in India are governed by the Indian Partnership Act, 1932. As per the Partnership Act, Registration of Partnership Firms is optional and is entirely at the discretion of the partners. The Partners may or may not register their Partnership Agreement.
However, in case the partnership deed is not registered, they may not be able to enjoy the benefits which a registered partnership firm enjoys.
Registration of Partnership Firm may be done before starting the business or anytime during the continuance of partnership. However, where the firm intends to file a case in the court to enforce rights arising from the contract, the registration should be done before filing the case.
The procedure for Registration of Partnership Firms in India is fairly simple. An application and the prescribed fees are required to be submitted to the Registrar of Firms of the State in which the firm is situated. The following documents are also required to be submitted along with the application:-
The application or statement must be signed by all the partners, or by their agents especially authorised in this behalf. When the registrar is satisfied with the points stated in the partnership deed, he shall record an entry of the statement in a register called the Register of Firms and issue a Certificate of Registration
The Register of Firms maintained at the office of the Registrar contains complete and up-to-date information about each registered firm. This Register of Firms is open to inspection by any person on payment of the prescribed fees
Any person interested in viewing the details of any firm can request the Registrar of Firms for the same and on payment of the prescribed fees, a copy of all details of with Firm registered with the Registrar would be given to the applicant
It should however be noted that registration with the Registrar of Firms is different from Registration with the Income Tax Deptt. It is mandatory for all firms to apply for Registration with the Income Tax Department and have a PAN Card.
After obtaining a PAN Card, the Partnership Firm would be required to open a Current Account in the name of the Partnership Firm and operate all its operations through this Bank Account.