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Partnership Firm

What is Partnership?
"Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The persons who have entered into partnership with one another are called individually "partners" and collectively "a firm", and the name under which their business is carried on is called the "firm name"

What are the essential facts of Partnership firm?

  • A partnership firm may or may not be registered.
  • The partners share the liabilities as well as profits of the firm in a predetermined ratio.
  • The partners in a partnership firm are bound by the Partnership Deed executed amongst them.
  • The partners act as the agent of the firm.
  • The partners hold personal unlimited liability in relation to the partnership firm.
  • A partnership firm does not enjoy the benefit of perpetual existence.
Advantages of a Partnership firm
  • Minimal Compliance: Partnership Firms are not required to appoint an auditor as they are neither under obligation to prepare audited financial statements each year nor to file its annual accounts with the Registrar of Firms each year, unlike an LLP or a Company. Annual compliances are less as compared to Limited Liability Partnership (LLP) and Company. Partnership Firms are required to file returns for Income Tax, Sales Tax and Service Tax depending upon their turnover and other criteria. A partnership firm is taxed under the Income Tax slab for firms and individual partners are taxed under the Income Tax Slab for individuals.
  • Easy to Start: The unregistered partnership firm can start its business operations on execution of Partnership Deed which is not registered. However, the registration process of a partnership firm is very simplified and the said registration certainly brings a few legal and operational benefits. It would enable the registered firm to file suits in court against other firm(s) or partner(s) in its own name for the enforcement of rights arising out of contract or rights given under the Indian Partnership Act, 1932.
  • Relatively Inexpensive: A partnership firm is comparatively less expensive to a Company or an LLP.
Limitation/ Shortcomings
  • Less capital contribution as compared to an LLP and a Company;
  • Unlimited personal liability of the partners, thus, attracts comparatively higher risks;
  • Lack of perpetual continuity of business;
  • Less Creditworthiness as compared to an LLP or a Company;
  • Less management and innovative skills of the firm as compared to an LLP or a Company.
FAQs on Partnership Firm
  1. Why should I set up a partnership firm?
    A partnership firm is the best for small businesses, having requirement of moderate capital, ease of setting up and minimal compliance requirements. Registration is optional for Partnerships. It is governed by the Indian Partnership Act, 1932, if the partnership firm has been registered.
  2. Is partnership firm a separate entity?
    The partners in a partnership firm are the owners and most of the partners personally look after the business activity of the firm. Thus, the partnership firm is not a separate entity from its partners. Any legal issue or debt incurred by the firm is the collective responsibility of its partners.
  3. How many partners can be there in the partnership firm?
    A partnership firm must have at least two partners. A partnership firm in the banking business can have up to 10 partners, while those engaged in any other business can have 20 partners.
  4. Can a partnership firm sue or be sued in its own name?
    Only a registered partnership firm can sue any other party in its own name. In case a partnership firm is not registered, the partners can individually bring a suit against the other party in their own names.
    A partnership firm can be sued by any party irrespective of the fact whether the partnership firm is registered or not.
  5. What are the main aspects of a partnership deed?
    The deed should contain names of the partners and their respective addresses, the name of the partnership firm, the date of commencement of operation of the firm, capital contribution of each partner, the type of partnership, profit-sharing ratio, rules and regulations to be followed for admission, retirement and removal of the partners.
  6. What are the documents required for registration of a Partnership Firm?
    The following documents are required for the registration of a partnership firm under the provisions of Chapter VII of the Indian Partnership Act, 1932:-
    • Form No. 1 (Application for registration under the Indian Partnership Act, 1932).
    • Original copy of Partnership Deed, signed by all partners.
    • Affidavit declaring intention to become partner.
    • Rental or lease agreement of the property on which the business is set up.
Our Services
  • Our Organization will guide you to decide whether you should opt for an unregistered or a registered firm.
  • Our team members will further guide you as to what registration(s) you need to take, whether service tax, VAT, import/export code, etc. along with the documents related thereto.
  • Our experts will offer their complete support till you receive the registration you have opted for.

 

We look forward for a rewarding and a fruitful professional association in the above field of Company law, Taxation Laws and other related laws provided given a chance of executing professional assignments.

Corporate Office

Vision IT Consultants Pvt. Ltd.
FFCS - 28, Ansal Plaza,
Vaishali (Near Dabur Chowk),
Ghaziabad-201010 (UP)

P: +91 120-411-7341

E: info@corpaffairs.org

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