The partnership is the relation between persons who have agreed to share all the profits and losses of the business they are partnered on. A partnership firm is a business run by multiple partners individually to achieve the same goal. A number of partners come together to operate a business. A partnership firm is not a distinct entity from its partners. A firm cannot employ servants, neither can it be a debtor or creditor like a company.
The partnership is divided into two types registered and unregistered Partnership firms. According to the Indian Partnership Act, the only criteria to be fulfilled to operate a partnership firm is to finalize the deed’s execution between the partners. You don’t have to register your firm under this act and it is known as unregistered partnership firms.
However, there are no penalties for unregistered partnership firms under Section 69 of the Partnership Act. This act deals with the effects of the unregistered partnership business. Here are a few reasons that opting registered partnership firm is better:
A registered firm partner can not file any case against the firm or other partners for the enforcement of any right from a contract.
An unregistered firm can not claim any trouble having with third parties. So, register a partnership firm to enjoy all the rights and privileges offered by the Partnership Act to the registered partnership firms.
Any kind of permit, license, or registration can not be transferred directly into an LLP. If there is any property registered under the partnership firm before the conversion, LLP must contact the concerned authority to initiate the transfer process.
After the successful conversion into LLP, the name of the partnership will be removed from the registrar of firms. Also, the conversion from a partnership to LLP will not affect any existing employment or contracts, etc.
Partners can enjoy all the benefits of Limited Liability Protection after the successful transaction of the Partnership firm into LLP. Also, the partners will be liable for all business operations, just like before the conversion.
Reserve Bank of India will provide you the Know Your Customer (KYC) norms to open the current account of your business firm. All banks can open the current account for your partnership firm based on your partnership deed. For the investment or payment process in the Partnership firm, the firm should have a current bank account.
Partnership firms don’t require too many formalities. You just need a Partnership deed.
In a partnership firm decision-making is faster, there is no concept of delaying. In India, partners enjoy the power of decision-making and can take decisions on the behalf of their partners.
As compared to Proprietorship, partnership firms can raise funds easily. Even banks easily permit the sanctioning credit facilities for them.
All the partners have rights and liberty to manage the firm and activities. All the partners work together for one cause and manage the operation of the firm to achieve one goal.
To register a partnership firm, documents like ID proof, address proof, and Partnership Deed are required.
Here are the following documents you can submit as identity proof:
Proof of business for the Partnership registration:
Also, a copy of the electricity bill or receipt of the tax bill
To start a partnership minimum of 2 members are required and a maximum of 20 members are allowed.
Any individual who is an Indian citizen and lives in India. Non-resident and Indian-origin people required special allowance from the government.
For a partnership firm, a PAN card, along with address and identity proof has to be submitted. You can even draft a Partnership Deed and get signed by all partners.
There is no fixed capital required to start a partnership firm. You can start with any capital.
