A sole proprietorship firm is a type of business entity that is owned, controlled and managed by a person (promoter). There is no legal difference between the business and its promoter. All profits are received by the promoter himself/herself. It is extremely easy to start such an entity as there are lesser legal formalities and lesser formation costs involved.
A partnership is a type of business organisation wherein two or more individuals come together and manage the business as per the terms and objectives set out in the Partnership Deed.
Being only an owner with a limited workforce and decision making skills, the opportunities might be restricted in a sole proprietorship. However, a group of people having the same intention of business and each having their thoughts and ideas to carry out the business can lead the company to tremendous success. Also, a partnership firm has more credibility for fundraising than a proprietorship which is quite essential for the growth of any business.
However, the partnership firm also have demerits, such as
Note : The partnership firm will require to obtain a PAN, GST number (if applicable) and Bank Account in the name of the firm. PAN of each partner will not be enough for the partnership firm.
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A partnership firm must have at least two partners to form a firm. A partnership firm in the banking business can have up to 100 partners, while those engaged in any other business can have 50 partners.
Yes, the partnership is required to obtain a new TAN for the firm if the Partnership firm is liable to deducted TDS/TCS as per provision of Income Tax Act,1961.
An individual, being competent to contract, can become a partner in the partnership firm. NRIs also can be a partner in a partnership firm subject to certain conditions. Even a minor can be a partner in a partnership act; a minor may also be admitted to the benefits of a partnership. The following can enter into a partnership:
Registering a partnership firm is beneficial for the partners as well as the partnership firm. By registering, a partner can complain or sue another partner or the firm itself. Moreover, to bring any suit to court, the firm should be registered. However, for small or family businesses, it is fine if a firm is not registered.