Partnership Firm
What is Partnership Firm?
Partnership in India are governed by the Indian Partnership Act, 1932 and as per this act a pertnership deed may be registered or unregistered.
To commence a partnership firm, atleast two persons are required. The firm doesn’t have a separate legal entity like a company. The firm is a collective name given to individual partners.
A firm is registered under Registrar of Firms, situated in the respective jurisdiction.
Partnership Firm is the most suitable type of business structure as it is very easy to form and a minimum of two people are required to form a Partnership Firm online. In Partnership firm, there are very minimal compliances in comparison to other business entities. In simplified language, we can say that partnership creates a relationship between two or more people who have agreed to carry on a business for profit and these people are known as partners.
What is Partnership Firm Registration?
To setup, a Partnership Firm in India, partnership firm registration is not necessary however it is always advisable to register a partnership firm to avail the legal benefits which cannot be availed in case partnership firm is not registered. Partnership Firm registration is the complete discretion of partners. HVJ can help you in partnership firm registration in India; for this, you just need to provide certain documents such as documents related to place of the firm, documents related to partner for identification, the motive of setting up partnership firm, profit sharing ratio and duration of the partnership.
Benefits of Registering Partnership Firm
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Power to file case in a Court by a partner against the firm or other co-partners
If any dispute arises among the partners or between a partner and the firm or between a partner and ex-partners, and the dispute is based upon the rights arising from contract (i.e. partnership deed) or upon the rights conferred by the Partnership Act, then a partner of a registered firm can always file a case in the court. This power is not available to the partner of an unregistered firm.
However, a criminal proceeding can be brought by a partner of an unregistered firm against the other partner(s). Thus, if a partner steals the property of the firm or puts fire to the buildings of the firm, any partner can prosecute him for the same.
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Power to file case in Court by firm against 3rd parties
The partners of a registered firm can always file a case in the court (if required), to enforce any right arising from contract e.g. for the recovery of the price of goods supplied. This power is not available to the partners of an unregistered firm (except in case of criminal proceeding).
It should however be noted that although an unregistered firm cannot file case against 3rd party, the 3rd party always has the power to file a case against both registered as well as unregistered firm.
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Power to claim set-off
If a 3rd party sues the firm to recover a sum of money the registered firm can always claim a set-off i.e. the registered firm can say that the 3rd party also owes some money to the firm and the same should be adjusted against the claim in question. This power is not available to an unregistered firm.
The above are some of the major benefits of registering a partnership firm and all partnership firms are advised to register themselves with the registrar of firms. It should however be noted that registration for Income Tax purposes is different from registration with the Registrar of Firms. Registration with Income Tax Department is mandatory for all Partnership Firms.
What are the features of Partnership Firm Registration in India?
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Minimum two persons are required
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Responsibilities and duties are shared among the partners of the Company
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Easy to set-up as partnership firm registration is optional
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Minimal legal formalities
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Fewer Compliances
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A minor cannot become a partner
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Flexibility in decision making
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Inexpensive to establish