Partnership Firm Registration

Want to register your partnership business?
In comparison to corporations, forming a partnership is simple and requires little compliance.

Form your Partnership Company quickly and easily with ICI!

Our Partnership Firm incorporation packages start from ₹7,499/- all-inclusive

What is a Partnership firm ?

A partnership is a type of business organization in which two or more people come together to run and operate a Firm in accordance with the conditions and purposes set out in the partnership deed.

Partnership deed is an agreement between the partners in which rights, duties, profits shares and other obligations of each partner is mentioned.

A Partnership is easy to form, and the compliance is minimal as compared to companies.

An Overview

Indian Partnership Act, 1932 governs the partnerships. Registration of partnership firm is optional and at the discretion of the partners.
By introducing a limited liability partnership (LLP), one may opine that Partnership firms has lost relevance because partners have unlimited liability, which means they are personally liable for the debts of the business which is not in case of LLP.
However, Partnership Firms are preferred since there are low costs of setting up the business and minimal compliance requirements, which makes it a sensible option for home/closed family businesses that are unlikely to take on any debt. Registration with Registrar of firms (ROF) is optional for Partnerships but advisable.

Checklist

Name of the firm
Details of all the partners
Main business activity of the firm
Place of Business of the firm
Date of commencement of business
Duration of the firm’s existence
Capital contributed by each partner and Profit/loss sharing ratio
Interest on capital payable to partners
Extent of remuneration which partners can draw
Procedure for admission or retirement of a partner
Method used for calculating goodwill
Preparation of accounts of the firm
Mode for settlement of dues with the executors of deceased partner’s
Procedure to be followed in case any disputes arise within partners

Steps to Incorporate a Partnership Firm

Step 1: Application for Registration of Partnership in Form No. 1

Step 2: Duly filled specimen of Affidavit

Step 3: Certified True Copy of the Partnership Deed

Step 4: Ownership proof of the principal place of business or rental/lease agreement thereof

Step 5: Obtaining Certificate of Incorporation from the Registrar

Or you can click here for our assistance

Advantages

Minimum Compliance
Audit is not compulsory for a partnership firm. Whereas, LLPs and companies has to file yearly returns with the MCA - ROC which is not the case in a partnership firm.
Easy to form and Close
Process to form a partnership firm is quite simple. Finding a Firm does not require any complicated legal process. Firm registration is not mandatory requirement. Firm can also easily register if required. You can easily close a Firm..
Comparatively Economical
The partnership is much cheaper to start than an LLP. Even in the long run, it will still work cheaply since the compliance requirements are minimal..
No minimum initial Capital Contribution
There is no minimum capital contribution requirement in case of a partnership firm. It can be started with a capital of as low as Rs. 10,000.
Sharing Risks
The partnership organization ensures various financial risks by allowing more than one person to share the risk because profit and loss are shared by different partners.
Better Tax Planning
The partnership firm is a separate legal entity and its tax is calculated separately. The interest, salaries, bonuses, commissions or remuneration paid to the partner are granted to the Partnership Firm as a deduction. It is a legal tool for tax planning.
Raising of Funds
Financial Institutions view a partnership more credible while lending loans and giving credit facilities instead of a proprietorship firm. Multiple partners can make for more feasible contributions.

Disadvantages

Number of partners
The Partnership Firm has a maximum number of 100 members.
Unlimited liability
Each partner is jointly and severally responsible for the firms debts. A spouse's dishonesty can devastate an entire firm and cause serious difficulties for everyone.
Lack of perpetual succession
A partnership firm does not have a separate legal existence of its own. It is dissolved upon the death of a partner or upon separation between them.
Limited source of External funds
Ownership structure does not allow investment by angel investors, venture capitalists or private equity firms. Banks / financial institutions also prefer to lend to companies rather than partnership firms, as companies are independent entities and regulatory requirements for corporate financial reporting make the company more transparent and structured.
Transferability of Interest
Transfer of interest from one partner to an outsider is difficult and requires unanimous acceptance from all other existing partners. Therefore, an investment in a partnership business is an illiquid asset.

Difference between Partnership Firm & LLP?

LLP	Partnership Firm
Cost of Formation
Around 6k-8k	Around 3k-4K
Registered Under
Ministry of Corporate Affairs, Central Government	Registrar of Firms, Controlled by the respective State Government in which the firm is registered.
Liability of partner’s
Partners are not responsible for other partner’s misconduct	One partner is not responsible or liable for another partner’s misconduct or negligence
No. of Partners
Minimum 2 Maximum unlimited	Minimum 2 Maximum 100
Perpetual Succession
In case of a LLP, if the number of Partners reduces below 2, the sole Partner can still find a new Partner to fill the position without dissolution of the LLP.	In case of a Partnership Firm, if the number of partners at any time reduces below the mandatory minimum of 2 due to death, incapacitation or resignation of a Partner, the partnership firm would stand dissolved.

Requisite Documents

Even after the foundation, the Partnership Firm can be registered at any time as per Section 58 of the Indian Partnership Act. A Partnership Firm is registered through the Registrar of Firms (ROF).

Passport size Photograph, Pan Card and ID proof ( Driving License/Aadhaar Card/Passport/ Voter ID) of all partners.
Original copy of partnership deed signed by all partners.
Stamp Paper (for payment of stamp duty on total initial capital contribution of firm).
Stamp Paper of Rs.100/- (For firm registration certificate).
Regional Language translation of Deed translated by Professional Translator with Notary.
Form “A” duly signed by all partners and notarised (Need to create Firm login on ROF portal).
Affidavit declaring intention to become partner - Require when Firm apply for IFC code.
Authority letter of Firm to authorised Professionals to complete Firm registration process.
Covering letter of Professionals. Require at the time of submission of documents.
Rental or lease agreement or Electricity Bill or any other utility bill of the property/campus on which the business is set.

Compliance required by Partnership Firms

Accounting & Book Keeping
It is always recommended to log the Partnership Firms business in cash or on a periodic basis to determine if these companies are making a profit..
Tax Audit
Partnership Firm are not required by law to maintain their accounts unless the Firms income for the financial year exceeds Rs. 1 Cr. and the total income from the profession exceeds Rs. 50 Lakh. In both cases, auditing partners under the 1961 Income Tax Act is mandatory.
Income Tax Returns
Income tax returns must be submitted by all affiliated companies with taxable income.

Incorporating a Partnership firm at ICI

You can start your own Firm by following the steps below.
Submit a request by clicking here.
Our Corporate Manager (CM) will get in touch with you to collect your documents along with a simple checklist.
Submit the filled checklist along with your documents for verification. All your documents will be verified by our team of experts here at ICI, and we shall take the process further. The CM shall keep you informed throughout the process.
After confirmation, our team creates login of respective firm on ROF portal to generate online Form “A”. The Form “A” contains very important details such as address, terms and conditions between partners, partner bonuses, capital interest, profit and loss share. A partnership certificate will be sent to you for confirmation. If you confirm, the same thing happens. All partners must sign the document on stamp paper.
After paying the stamp duty and filing fees, the Firm will be entered in the record as soon as the registrar approves the application. After registration, the partner receives legal approval and the partner presents a registration certificate.
Once Firm Deed is executed, then we would proceed to apply for PAN and TAN of your Firm.
Once you have received your PAN, you can open your firms current bank account with the bank of your choice.

FAQs

a. Is there any limit on the number of partners?

A partnership requires at least two partners. Bank partnership companies can have up to 100 partners, while companies operating in other companies can have 50 partners.

b. Should I register my partnership firm or not?

Registering a partnership firm is not mandatory but registering with ROF is beneficial for the partners as well as the partnership firm. By registering, firms can get benefits from bankers (at the time of applying loan / Credit facility), a partner can lodge a complaint or sue another partner or the firm itself. The LLP should also be registered so that the partnership can bring suit. However, for small or family businesses, it is fine if a firm is not registered.

c. Does acts of one partner make other partners responsible?

Yes. The law assumes that each partner is a representative of the other partner and that dealing with one partner in good faith also binds the other partner.

d. What is Partnership at will?

If the partnership registration certificate does not include the duration of the partnership or the terms of the termination of the same, it is a voluntary partnership.

e. What are the requirements to become a partner in a Partnership Firm?

An individual with contractual skills can become partners of partnership companies. NRI’s also can become a partner in partnership firm subject to some conditions. Even a minor can be a partner in a partnership act however minor may be admitted to the benefits of a partnership.

The following can enter into a partnership:-
» Individual
» Partnership Firm
» Karta of Hindu Undivided Family,
» Company
» Trustees

f. How can I transfer my ownership in a Partnership Firm?

The transfer of ownership of partnerships is subject to restrictions. Partners may not transfer their interest in the firm to third parties (Excluding existing partners) without the unanimous consent of all other partners.

g. Is conversion of partnership firms into LLP or Private Limited allowed?

Yes, a firm can be converted into LLP or PLC by following the procedures laid down in the acts. However, converting a partnership into a company or LLP is cumbersome, expensive, and time-consuming. It is therefore advisable for many entrepreneurs to consider and set up LLP or a company instead of a partnership.

h. Still Confused?

Speak to our experts who shall solve all your doubts.
Call us at +91 7738 066 334 or Mail us at info@indiacompanyincorporation.com

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