Partnership

When we talk about the forms a business organization can take, one of the most prominent ones is a partnership. In India particularly it is a very popular entity to carry out business.

A Partnership firm is a business entity created by persons who have agreed to share profits or loss of the business. Partnership is a very good choice of business entity for small enterprises wherein two or more persons decide to contribute to a business and share the profits or losses.

Types of Partnership

Partnership Firm in India are established and governed under the provisions of Indian Partnership Act 1932 (referred as “Act”). Partnership Firm in India may be registered or may be non-registered. It is not compulsory to register under the Indian Partnership Act, 1932. The benefits for registering Partnership Firm as prescribed under section 69 of the Indian Partnership Act, 1932. The Registered firms are more reliable as compared to non-registered firms.

What is a Partnership Deed?

Partnership deed is an agreement between the partners of a firm that outlines the terms and conditions of partnership among the partners. It specifies the various terms such as profit/loss sharing, salary, interest on capital, drawings, admission of a new partner, etc. in order to bring clarity to the partners

This deed is required by all types of firm whether registered or unregistered.

Registration of Partnership Firm

A partnership firm can be registered under Section 58 of the Indian Partnership Act at any time, even subsequent to the formation. The registration of a partnership firm is done through the Registrar of Firm in which the partnership firm is situated. When the Registrar of Firms is satisfied that the provisions of Section 58 are complied with, a record of entry of the statement is made in the Register of Firms and Certificate of Registration is issued.

Documents/Details Required for formation Partnership Firm (Registered/unregistered)

  1. PAN Card of the partners
  2. Address Proof of partners
  3. Address proof of principal place of business (Ownership document in case of owned/rent agreement in case rented/NOC in case consented premises)
  4. Capital contribution by partners
  5. Profit Sharing ratio
  6. Name of Partnership firm
  7. Business activity that firm will carry

Key Registrations

The following key registration which partnership firm concern should obtain at the time of start of business:-

  1. Trade License/Gumasta
    Trade licence/Gumasta is a registration required for doing any kind buisness. This registration is obtain from the state goverment. This licence is basic requirement for opening bank account and obtaining other registration.
  2. MSME Registration
    MSME or Udyog Aadhaar registration can be obtained in the name of the business to establish that the partnership firm is registered with the Ministry of Micro, Small and Medium Enterprises.
  3. TAN Registration
    TAN registration must be obtained for the proprietor from the income tax department if the partnership firm is making salary payments and any other payments on which TDS deduction is required.
  4. GST Registration
    GST Registration must be obtained if the partnership firm engages in manufacturing of goods, trading of goods or providing services to its clients.
    The threshold limit for registration is decided by central government from time to time. In most states, GST registration is required for service providers having annual revenue of more than Rs.20 lakhs and in case of traders – annual revenue of more than Rs.40 lakhs.
  5. Import Export code
    Import Export Code or IE code can be obtained from the DGFT in the name of the business – in case of a partnership firm undertaking export and/or import of goods into India.
  6. FSSAI Registration
    In case the partnership firm is involved in the selling of food products or handling of food products, FSSAI registration must be obtained from the Food Safety and Standard Authority of India in the name of the partnership firm.

Legal Compliance requirement for Partnership Firm

Direct Tax

The partnership firm will have to file income tax return with income tax department. Also quarterly TDS return needs to be filled if TDS has been deducted on specified payment 

Indirect Tax

The partnership firm will have to file GST returns with GST department on monthly.

Audit

It is not necessary for partnership firm to prepare audited financial statements each year. However, a tax audit may be necessary based on turnover and other criteria

How we can help you?

We will help you to draft partnership deed, register the firm, obtains key registration and also to comply with various legal requirement.