Overview of Partnership Firm Registration

A partnership firm is a kind of business structure in India, wherein there are a minimum of two persons. Partners share profits based on agreed ratios in businesses like ex.- trade, occupation, and profession. Partnership registration is governed by the Indian Partnership Act, 1932, by which the partners enter into a contract known as a partnership deed to regulate their relationships and with the firm.

Importance of Partnership Registration Online

The most significant advantage of partnership registration is the separate legal entity status granted under law. The registered partnership firm can open a bank account, obtain trade licences, initiate legal proceedings, enter into contracts and undertake various business dealings in its own name. The partners' personal assets are protected from business liabilities. This promotes more organised accounting and documentation.

With this, registration of partnership is helpful in preventing the unauthorised and fraudulent use of the firm name and goodwill by other people or the outsiders. It safeguards the brand identity built by the partnership. The registration certificate also facilitates carrying out daily business smoothly by serving as identity proof with customers, investors, banks etc.

Further, in case of any disputes between partners, registration helps prove the terms of the partnership through legal evidence. It outlines procedures for dispute resolution and adds authenticity while obtaining loans or approaching courts as an enterprise.

From taxation and compliance angles too, registered firms are better organised to meet reporting requirements, file taxes and avail legal exceptions. Overall, the process lends more transparency to the partnership in all external dealings. Partners can even avail funding from banks using firm assets. Hence, registration upgrades an informal collaboration to a formal, legally tenable partnership model with regulatory advantages. Obtaining these benefits through registration justifies overcoming the small procedural efforts and fees involved.

Who Can Be a Partner in Partnership Firms

Following can be partners in Indian partnership firms:

Characteristics of Partnership Firms

Following are the features of partnership firms in India:

Benefits of Partnership Registration

The benefits of registering a partnership firm in India is as follows:

Easy Incorporation:

• Partnership deed and agreement sufficient.
• No need for registration with Registrar of Firms initially.
• Registration voluntary, can be done later.

Fewer Compliances:

• Easy changes in business.
• Cost-effective registration and dissolution.

Quick Decision-making:

• Partners have equal say in decisions.
• Immediate implementation of decisions.
• Wide powers without need for unanimous consent.

Profit and Loss Sharing:

• Equal sharing of profits and losses.
• Freedom to set profit-sharing ratio.
• Joint and several liability for firm's activities.

Disadvantages of Partnership Registration

The disadvantages of partnership firm registration online is as follows:

Unlimited Liability:

• Partners bear losses from personal estate.
•  Liability extends to all partners and insufficient assets lead to personal debt settlement.

No Perpetual Succession:

• Partnership ends with partner's death, insolvency of all except one, or partner's notice of dissolution.
• Lack of perpetual existence.

Limited Resources:

• Maximum 20 partners restrict capital investment.
• Capital limited to sum of individual investments, hindering scalability.

Difficult to Raise Funds:

• Lack of perpetual succession and separate legal entity complicates capital raising.
• Limited options for growth compared to companies or LLPs.

Checklist for Partnership Firm Registration Online

Following are the important points in the checklist to register partnership firm online in India:

Documents Required for Partnership Firm Registration Online

The necessary documents to register a partnership include:

Partnership Firm Registration Process Online

The process of registering a partnership firm is as stated below:

Step 1) Obtain Digital Signature Certificate

Partners need to acquire a DSC or digital signature issued by authorised agencies. This e-signature is mandatory for all partners to electronically sign and file registration documents.

Step 2) Acquire Designated Partner Identification Number

After getting DSC, partners must obtain a unique DPIN or Designated Partner Identification Number from the Ministry of Corporate Affairs portal.

Step 3) Select an appropriate name for the partnership firm 

Partners should select a name for their firm that is unique and with it also does not match any existing business, and complies with naming guidelines under Emblems and Names Act.

Step 4) Draft the Partnership Deed

Prepare a partnership deed agreement clearly stating all terms like ex.- firm name, nature of business, partners' names and addresses, capital investments, profit or loss sharing ratios, rights and duties of partners etc.. 

Step 5) Apply for registration with Registrar of Firms

Fully complete the application form for new firm registration and then go to submit it to the Registrar of Firms of the state where the firm is located, along with the partnership deed, prescribed fees, attachments and signatures of all the partners.

Step 6) Obtain registration certificate

The Registrar examines the application and on satisfying compliance to requirements, enters the firm’s name in the Register of Firms and issues a partnership registration certificate.

Step 7) Apply for PAN and TAN

Obtain Permanent Account Number and Tax Deduction and Collection Account Number from Income Tax department post registration.

Step 8) Comply with post-registration requirements

File statements of accounts and solvency annually, notify changes in partners through forms, quote registration number on letterheads, invoices etc. as per guidelines.

Partnership Firm Registration Fees

• Partnership firm registration fees can vary by state based on partners' contributions.
• Register quickly and cost-effectively online via StartupFino.
• Services included in the registration plan:
• PAN application
• Partnership deed drafting
• Filing of deed and other documents with the Registrar of Firms
• Issuance of registration certificate

Partnership Deed

A partnership deed is a legal document formalising the terms and conditions among partners of a partnership firm. Though not mandatory, having a comprehensive partnership deed prevents future conflicts between partners.

Contents of Partnership Deed

Given below are the contents to register partnership deed:

Particulars of the Firm & Partners

This covers the name of the partnership firm, nature of business, registered office address, names and personal details of all the partners.

Capital Contribution & Profit/Loss Sharing

The deed clearly specifies capital amount invested or assets brought in by each partner along with the fixed profit/loss sharing ratio of each partner. This determines partners' distribution of profits or losses. 

Rights & Duties of Partners 

This deals with respective authorities, responsibilities and duties delegated to each partner regarding the functioning, operation and representation of the partnership firm based on mutual agreement. 

Salary, Commission, Interest & Drawings

The deed contains provisions for monthly/annual salary for active partners, commissions, interest rate payable on capital & loans given by partners, limits of drawings etc. as mutually decided.

Admission, Retirement and Death

The terms and account settlement procedures in case of admission of a new partner or retirement or death of an existing partner are delineated.

Dissolution of Firm

The deed specifies the process of dissolution, settlement of accounts, valuation and disposal of assets/liabilities upon dissolution as consented by all partners.

Arbitration Clause 

This clause provides for alternate dispute resolution mechanisms through arbitration in case of disputes between partners to avoid legal proceedings.

Compliances for Partnership Firms Post Registration

Once the partnership firm is registered, these are the following compliances which are must to be fulfilled:

• Apply for PAN and TAN no. for the partnership firm.

• Register for GST if annual turnover exceeds Rs. 40 lakhs (Rs. 20 lakhs in some cases).

• File Tax Deducted at Source returns as applicable

• Obtain income tax registration and file regular tax returns 

• Pay 30% income tax rate if annual turnover above Rs. 10 lakhs

• Conduct mandatory annual audit if turnover exceeds Rs. 1 crore

• Register with Employees State Insurance Corporation for employee insurance compliance.

Why Choose StartupFino for Partnership Firm Registration?

StartupFino specialises in helping partners register their partnership firm and maintain compliance. We guide partners right from the initial planning stages with advice on partnership agreements, profit sharing terms, capital contribution etc. Once you finalise partnerships terms between yourselves, we assist in preparing and filing for partnership registration as per legal requirements. This includes ensuring you have the partnership deed, signing the forms, paying fees etc. 

Our services also cover completing formalities to obtain PAN, TAN, GST registration, shop establishment licence etc. for the partnership firm based on eligibility. Further, we help registered partnerships remain legally compliant annually through advice on tax filing, audits, partner changes, intimation and other compliances.