Incorporating the Partnership Firm In India
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A Partnership Firm is a form of an organization where two or more partners agree to share the profits and losses of business jointly. It implies the contractual co-ownership of a business. A Partnership firm is easy to form and fewer compliances are involved related to tax. A partnership can be formed to start any type of business relating to trade, manufacturing, or any other.
There is a formal agreement between the Partners such agreement is known as “Partnership Deed”. Partnership deed contains all the important clauses like Profit Sharing ratio, Capital Contribution, and other relevant clauses.
The law that governs Partnerships In India is the Indian Partnership Act, 1932.
The relationship of Partnership arises from “Contract” not from “Status”.
A partnership firm has its own PAN number which can be obtained from Income Tax Department. With the different PAN numbers, a GST Registration is obtained and an Income Tax Return is filed.
A partnership can be of specific duration which is mentioned in the Partnership Deed. In case no duration is mentioned such Partnerships are considered as Partnerships At Will.
Easy to Incorporate and Less Compliances: A partnership firm can be easily incorporated by making a Partnership Deed and obtaining a PAN card for Income Tax. Partnership Firms are not required to mandatorily register with the Registrar. A simple agreement between persons to start a business creates Partnership Business. Compliances involved with a Partnership are minimal like Income Tax Filing, GST Registration, and Returns Filing. It is optional to register the Partnership in the state. There is not any requirement of obtaining a Digital Signature or Director Identification Number (DIN) unlike Companies that involve a lot of compliances.
Sharing Of Profits and Losses and Mutual Agency: A Partnership Deed defines the sharing the profit and losses. When Partners themselves are accountable for profits and losses, there is a sense of ownership and accountability. So, they aim to maximize the profit. Also, certain partners like minors can only be admitted for profit sharing, not for any loss. There is a mutual agency that all partners act for the partnership firm’s own interest not for self-interest.
Decision Making: Under Partnership, there needs to be an informal agreement between partners to take any action or respond to any situation. There is no requirement of any Board Resolution and other compliances involved in Companies in taking major decisions. That’s why under Partnership decisions can be taken quickly.
A partnership firm can be registered even after incorporation. Partnership firms are registered in respective states. Partnership firm registration is not mandatory compliance, however, nonregistered firms will be denied certain rights mentioned in Section 69 Of the Indian Partnership Act, 1932. Now, what are the documents required for registering a Partnership in India.
Partnership registration Application would require the following documents the Identity proof, address proof, a copy of the Partnership deed, and proof of the Principal place of business.
Following Identity Proofs Can be used
Proof of Place of Business