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Partnership Firm Registration

A partnership firm is a popular business structure commonly chosen by newly established businesses in India. It requires a minimum of two partners to be formed.

The formalization of a partnership firm is done through a partnership deed an important document that outlines the terms and conditions agreed upon by the partners. This deed serves as a guide for managing the firm’s operational and financial arrangements, ensuring clarity and mutual understanding among the partners.

Step-by-Step Partnership Firm Registration Process

The registration of a partnership firm in India is governed by the Indian Partnership Act 1932. Unlike a One Person Company or a Hindu Undivided Family, a partnership business involves two or more individuals joining forces to achieve maximum returns through joint effort. This process involves selecting an appropriate name at the time of its formation and submitting an online application form. To ensure smooth legal compliance, partners must provide requisite documents like ID proof and a Digital Signature Certificate. The complete registration process is outlined below:

Step 1: Rules for Naming a Partnership Firm

  • The name is not identical or too similar to any existing firm or registered trademark
  • It does not have words such as ’Crown,’ ‘Emperor,’ ‘Empire,’ or any word giving the impression that the government has sanctioned it or is associated with the government
  • Their names must be part of the name used by the firm.

Step 2: Drafting a Partnership Deed

  • Name and address of the firm and its partners
  • Nature of business
  • Amount of capital to be contributed by every partner
  • Profit and loss, as well as assets division ratio
  • Resident's responsibilities
  • Procedure of entry, retirement, or expulsion of a partner
  • Procedure for resolution of disputes.
  • Period of partnership, if it is for a limited period.

Step 3: Filing a registration application with the Registrar of Firms

  • A partnership firm in India gets registered by making an application to the Registrar of Firms (RoF) of the state wherein the firm would be located.
  • It is prescribed to be filed on the prescribed Form 1 under the Indian Partnership Act, 1932.
  • These forms are obtainable at all RoF offices and also downloadable from the websites of the respective state's RoF.

Step 4: Certificate of Incorporation

  • After the due verification and clearance of the documents, the Registrar issues the Certificate of Incorporation.
  • This is the legal proof of the existence of the firm and gives it the authority to conduct operations and follow the rules and regulations as prescribed by law.
  • The registration of the said certificate marks the formal beginning of the firm as a legally recognised body.

Key Characteristics of a Partnership Firm

In a partnership firm two or more individuals collaborate to run a business, sharing profits and responsibilities. Here are eight characteristics of a partnership firm:

Partners

The least number of partners under a partnership firm is two. The partners must be of sound mind and not disqualified by law unless he is minor or of unsound mind. According to the Companies Rules, 2014, Rule 10, no more than 50 persons can form partners of a partnership firm

Deed of Partnership Agreement

It is an agreement/deed between partners that partners sign in order to constitute the terms and conditions of this partnership

Lawful Business

Partners are entered into the partnership to carry out lawful business, such as trade, vocation, or profession. Non-profit-generating charitable organisations cannot be considered a firm

Profit-Sharing

The terms of the profit-sharing percentage among partners are agreed upon while drafting the partnership deedsing and other financial benefits.

Mutual Agency

Both partners will act as agents and principals whereby all or any one partner can conduct the business on behalf of others

Documents Required for Partnership Firm Registration

To register a partnership firm, key documents such as the partnership deed, identity proofs of partners, and address proof of the firm’s registered office are required. Here is a list of documents for the same:
  • Application for Registration of Partnership (Form 1)
  • Registered photocopy of Partnership Deed
  • Copy of an affidavit confirming all the details mentioned in the partnership deed and documents are correct
  • PAN card and address proof of the partners
  • Ownership documents or rental/lease agreement, for ascertaining the principal place of business of the firm.

Eligibility and Requirements to Register a Partnership Firm

To register a partnership firm, certain legal criteria and documentation must be met, ensuring the business is recognised under the law. This process involves choosing a partnership name, drafting an agreement, and fulfilling the requirements set by relevant authorities.

Minimum Partners Required

  • A partnership firm must have at least two persons.
  • A partnership firm comes into existence when two or more persons, either by oral or a written agreement, come together to form a business and divide the profits between them in proportion that has been mutually agreed upon by them.

Partnership Firm Registration Fees

India Registration Fees of a Partnership Firm Various states and compliance require scope may affect the amount at which a partnership firm registration fee is estimated.It ranges between ₹500 to ₹3,000. The minimum stamp paper value for the execution of the partnership deed is ₹200. The stamp duty differs from state to state and is applied based on the contribution of the partners. Apart from the registration fees, there could be other expenses a partnership firm might incur for its existence, such as:
  • GST registration
  • FSSAI registration
  • IE code
  • Trade license
  • Professional tax