In this blog, we will talk about setting up a partnership deed and registering a partnership firm. Partnership firms are comparatively easy to formulate compared to LLP’s and companies. This blog serves as a quick guidebook that one needs to follow to register partnership firm before initiating a business in India.
Partnership name firm
The first step in this direction is to create a partnership firm by selecting a good name. Partners have all the freedom to choose any name they prefer as long as it abides by the following rules;
– The name should not be too identical or resembling to another existing firm that is involved in the same business. This is to restrict confusion and safeguard the reputation and goodwill of the already existing firm.
– The firm should not contain words such as the crown, imperial, or words expressing or implying sanction, patronage, or government approval. Nonetheless, if the state government signifies its approval in writing to use such words as part of the firm’s name, it can be done.
Creating a partnership deed
The partnership deed is the most crucial document while formulating a partnership firm. This document has all the respective obligations and rights of each partner.
While a partnership deed can be written or an oral agreement for the tax objectives, the partnership agreement must be written. The crucial minimum requirements of a partnership deed are given below;
– All the partners’ names and addresses and the firm.
– Nature of business carried on.
– Partnership duration.
– Business commencement’s date.
– Each partner’s powers, duties, and obligations.
– Each partner’s capital contribution and share ratio.
Besides, the partners, as mentioned earlier, might also put in additional clauses. Some of the additional clauses generally put in are given below;
– Commission and salaries for payable partners.
– Arrangement of the audit.
– Interest on partner capital and loan of the partner.
– Rules have to be followed in case of retirement or partner’s demise.
A partnership firm has to be made according to Indian stamp act along with all the partners should have one copy of deed. A partnership deed’s copy has to be submitted with the registrar of the firm if the firm is being registered.
Why should you register as a partnership?
While it is not mandatory to register a partnerships firm, it can be beneficiary to understand the registration process of partnership-based startup as the following rights are available to registered firms;
– The right to submit a suit in any court against the firm or other partners to enforce any rights arising from the partnership act or any contract.
– A right arising from any contract cannot be imposed in any court by the firm.
– The firm or any of its partners cannot claim any set-offs or other process in a dispute arising with a third party.
The registration process for a partnership firm
The partnership firms in India are governed by the Indian partnership act, 1932. A partnership firm can be registered at the time of creation or after.
To register a firm in India, an application and the stated fees are to be filed to the registrar of the firm of the state in that the firm is located. The following documents are also supposed to be filed with the application.
– Application for registration of partnership in form no 1.
– Duly submitted specimen of the affidavit.
– Certified partnership deed’s true copy.
– Proprietorship proof of the principal place of business. It could be a lease or rental agreement as well.
The application must be signed by all the partners or agents sanctioned by the partners on this behalf. If the registrar is satisfied with it, then he/she will record an entry of the statement in a registrar called the registrar of firms and issue a certificate of registration.
The registrar of the Firms maintained at the office has full and latest information of all the registered firms. This registrar of the firm is open to examination by any person on payment of the stated fees. On the payment of the stated fee, a copy of all the firm’s details registered with the registrar would be given to the applicant.
It should be noted that registration with the registrar of firms is distinct from registration with the income tax department. Registration with the income tax department is compulsory, while registration with the registrar of firms is optional. Also, all firms must have a PAN card.
After getting the PAN card, the firm is obliged to open an account in the name of the partnership firm and operate all its transactions via this bank account as per section 58(3) of the Indian partnership act, 1932.