PARTNERSHIP FIRM

If you are well versed in some domain but do not have enough sums of money to invest and start your own business, you can choose the basic option of starting a Partnership Firm with your friends or family. The Partnership Firm offers the easiest way to register a business and obtain a separate PAN Card in the business’s name. It’s simple to establish, operate, and even dissolve. This simplicity is why aspiring entrepreneurs opt for a Partnership firm when joining forces with others to start a business.

What is a Partnership Firm?

Partnership Firm registration in Chennai, the business arises when two or more people come together to carry out a business to achieve their common business goals. In India, we have a definitive law that covers all aspects of a partnership business, the Indian Partnership Act of 1932. The law defines a partnership as “the relationship between two or more persons who have agreed to share in the profits of a business conducted by all of them or any of them on behalf of/acting for all”.

What is a Partnership Deed?

You may have a very important question, what is a partnership deed? And what are the points that should be mentioned in a partnership deed?

A partnership agreement is a proper legal document that contains the terms and conditions that are agreed upon by all the partners who are about to start a legal business to share the profits. The Partnership Firm comes into existence as soon as all partners sign the agreement in front of witnesses. In the event of dissolution, the rights of the retiring partners and the distribution of business assets will be divided according to the agreed terms as mentioned in the partnership deed.

The association would contain the following details,

Name of the partners
Business Name
Date of starting business
Purpose of Business
Principal place of business
Capital Contribution
Profit and Loss Ratio
Rights and Responsibilities of Partners
Borrowing power
Dissolution procedure

What are the advantages of being a Partnership Firm?

There are many advantages to being a Partnership company registered in Chennai, which is why many people choose this type as their business entity. Here we will see the main advantages of the associated company.

Easy to Form:

A partnership firm is easy to form compared to other types of company. It can be easily formed by drafting a partnership deed and entering the partnership agreement apart from partnership deed the other documents are optional even though the partnership firm can be easy by signing a partnership firm registration and the registration process is optional in chennai without registration the partnership firm can be easily formed with the help of partnership deed.

Flexibility in operation:

Partnership firms are flexible to operate . At any time all Partners can decide and change the Object, Capital, and even the Business activity because there is no difference between the owners and management or the single partner can also make individual decisions and handle the transaction on behalf of the firm without the consent of the other partners.

Sharing the Risk:

The partners of the firm equally share the profit and losses of the business as per the agreement that has been agreed upon even though the profit and losses of the business based upon their work they have the responsibility of ownership and accountability. Hence the risk is equally shared based upon partnership deed ratio. so their burden of losses will not lie on a particular one person equally shared with all other partners.

Credit:

From comparison to the proprietorship firm there were many partners in the partnership firm so they can easily raise the funds unrestricted.As the Partnership firm is of the nature of Unlimited Liability, the debtors can easily process the loan from the bank and the institution grant loan because they see less dangerous granting credit to the partnership firm compared to sole proprietorships

Legal Restrictions:

There is no excessive legal restriction related to the Partnership firm. As well as the partnership firms are not compelled to publish their legal statements or reports to the government compared to other businesses their activities were easily maintained. Hence there is freedom in administration

Simple Dissolution process:

when every partner agreed mutually then The Partnership business can be easily dissolved by simply signing the dissolution deed and if there is no partnership agreement the partners need to negotiate together to dissolve the business. After dissolution if the partners want to start the firm again they can easily form a Partnership firm by simply signing the reconstitution deed.

What are the essential requirements to form a Partnership Firm?

Two partners
Lawful business purpose
Office space in India
Capital
Partnership deed

What is partnership firm Registration?

Partnership registration is nothing but registration of partnership firms by the partners with the registrar of the firm where the business is located. For registration of partnership firms the partners can apply for registration at the time of incorporation or at any time during its operation. Even though registration of the partnership firm is optional the registration of firm with the deed provides legal benefits to its partners.

What is the importance of registering a partnership firm?

The registration of partnership firms is optional and not mandatory under the partnership act.For registration of partnership firms the partners can apply for registration at the time of incorporation or at any time during its operation of business. But always the registration of partnership firms is advisable to register to enjoy the legal benefits compared to the unregistered partnership firm and some of the legal benefits for the registered partnership firm are.

The partners claim against other partners for breaching their contracts.
A registered firm can claim any other third parties for breaching on the contract
Can claim for set off

What are the documents needed to register a Partnership Firm?

Proof of the partners:

Aadhar Card of all the partners
PAN Card of all the partners
Passport size photo of all the partners

Proof of the business:

Partnership Agreement
Rental Agreement
Utility Bill

Difference Between Registered Partnership firm and Unregistered Partnership Firm.

Particulars	Registered partnership firm	Unregistered PartnershipFirm
Credibility	A registered Partnership firm can build credibility among the existing partners and upcoming partners	An unregistered partnership firm cannot built credibility among the partners
Buy Property	A Registered partnership firm can buy the properties by using the company	Unregistered partnership firm cannot buy property by using company name
To sue	If any legal dispute arises between the partners they can sue the partners in the court.	Whereas in unregistered partnership firm if any dispute arises they can not sue cannot sue against other partners
To Sue Third Parties	A registered firm can claim any other third parties in its own firm name for breaching on the contract	An Unregistered firm cannot claim any other third parties in its own firm name for breaching on the contract
Right to Claim Set-Off	A registered partnership firm can claim for Set-Off	An Unregistered partnership firm cannot claim for Set-Off

What are the commonly known elements of a Partnership Firm?

Investment: To operate a business, it requires money for its day-by-day activities, which we call its operational cost. So to manage the expenses we need capital.

As per the partnership act, there is no specific sum of money mentioned as capital. So with even a minimum of 10,000/- also we can start a partnership business.

Membership: Minimum 2 Partners are required for a partnership business

Deed: The formation is based on a written agreement & it’s called partnership deed registration. A Partnership Firm comes into existence when all the partners agree with the terms and sign the agreement which is called a Partnership deed. This speaks about all the terms and conditions of the partners and also the rules and regulations of the business.

Sharing of profit: Profit is shared as agreed upon through Partnership deed registration ratio

Responsibilities: Partners are collectively and individually responsible for liabilities

The Indemnity laws vary from each and every state, certain states having the specific state legislatures, which will govern the indemnify statutes clearly. So the correct jurisdiction and the state law should be considered before drafting the indemnity agreement. Also the agreement should state the court’s jurisdiction clearly. For every Indemnity agreement, the governing laws and the jurisdiction plays a major role in the determination and the validity of the agreement to be enforced.

What are the differences between a Partnership Firm and a Limited Liability Partnership?

Particulars	Partnership Firm	Limited Liability Partnership
Regulating Act	The governing law for partnerships is the Indian Partnership Act of 1932	Limited Liability Partnership Act of 2008 is the governing law for limited liability partnerships.
Annual Filing	As per the rules, partnerships firm are not required to file annual reports with the ROC	Limited liability Partnership Firm, filing an annual report is mandatory.
Registration	Registration is optional	Registration is Mandatory
Constitutional documents	The charter document of the Partnership Firm is the Partnership Deed	A limited liability partnership is the Limited Liability Partnership Agreement.
A maximum number of partners	A partnership allows a minimum of two partners and a maximum of one hundred partners	minimum of two partners and no limit on the maximum number of partners.
Winding up	Partners can easily be winded up voluntarily by signing a mutual agreement or by court order	Limited Liability Partnership can also be wound up voluntarily or by order of the National Company Law Tribunal (NCLT).

FAQ

FAQ ON PARTNERSHIP FIRM:

1.What is the time period for partnership firm registration in India?

The registration of partnership firms in India can take up to approximately 10 days from the time taken to issuance of incorporation certificate depending upon the rules and regulations of the particular state. The process of registration lies with the government processing where the time period varies from state to state.

2.Can we register a partnership firm with an old partnership deed?

Yes, it is possible to register the firm if the partnership agreement is made earlier according to Section 58 of the Indian Partnership Act,1932 can register that partnership deed to the registrar of the firm within the territory of the firm.

3.What is the liability of partners in the partnership firm and LLP?

As Partnership firms are of the nature of Unlimited Liability,the partners will be held liable equally to debts and liability of the business,whereas in a limited liability partnership the partners will be liable to limited liability based on the amount that has been invested by them in the business.

4. Can a partnership firm get their funds by sale of their shares?

No funds of the partnership firm cannot be raised by the sale of their shares because companies can only raise the fund by sale of shares whereas in partnership firms the funds raised from the partners or loan from external sources are not by selling shares.

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PARTNERSHIP FIRM