What is Partnership Firm Registration?
A Partnership Firm Registration is a formal arrangement by two or more parties to manage and operate a business and share its profits and liabilities. The partners in a partnership may be individuals, businesses, interest-based organizations, governments or combinations. Persons who have entered into partnership with one another to carry on a business are individually called “Partners “; collectively called as a “Partnership Firm”; and the name under which their business is carried on is called the “Firm Name” A partnership firm is not a separate legal entity distinct from its members.
What are the features of Partnership Firm Registration?
Formation/Partnership Deed Agreement
A partnership firm is not a separate legal entity. However as per the act, a firm must be formed via a legal agreement between all the partners. So, a contract must be entered into to form a partnership firm. Its business activity must be lawful, and the motive should be one of profit. So two people forming a partnership to carry out charity and/or social work will not constitute this form of organisation.
All the partners forming partnership firm have unlimited liability in the business. The partners are all individually and jointly liable for the firm and the payment of all debts. This means that even personal assets of a partner can be liquidated to meet the debts of the firm. If the money is recovered from a single partner.
Continuity of Partnership firm
A partnership cannot carry out in perpetuity. The death or retirement or bankruptcy or insolvency or insanity of a partner will dissolve the firm. The remaining partners may continue the partnership if they so choose, but a new contract must be drawn up.
Number of Partners
There should be a minimum of two person to form a partnership. However, the maximum number will vary according to a few conditions. The Partnership Act itself is silent on this issue, but the Companies Act, 2013 provides clarity. For a banking business, the number of partners must not exceed ten. For a business of any other nature, the maximum number is twenty. If the number of partners increases it will become an illegal entity or association.
In this type of organisation, the business must be carried out by all the partners together. Or alternatively, it can be carried out by any of the partners (one or several) acting for all of them or on behalf of all of them. So this means every partner is an agent as well as the principal of the partnership.
What documents are required for registration of partnership in Delhi India?
- Partnership deed underlying terms of partnership
- Identity proof -PAN card, adhaar card, voter ID of the partners
- Address proof of partners like, Driving license, Passport, bank statement
- PAN card of Firm
- Ownership proof of the premises, if premises is owned
- Rent agreement and No objection certificate from owner if premises is on rent, electricity bill etc.
- Electricity Bill/ any other utility bill, not older than two months
- Bank account details of firm
Any other document or details if required will also be communicated
Mandatory Compliances for Partnership Firm after incorporation in India
Partnership firms are required to comply with all the laws and regulations applicable on them. Partnership firm compliance mainly includes filing of income tax return whereas corporate entities like LLP and Company require both income tax return filing with the Income Tax Department and annual return filing with the Ministry of Corporate Affairs.
In addition to the basic compliance, partnership firms may also be required to comply with GST compliances, TDS compliances, ESI/PF compliances and various other compliances. The compliance requirement may vary based on the type of entity, industry, state of incorporation, number of employees and sales turnover.
Partnership firms having annual turnover of over Rs.1 Crores are also required to obtain a tax audit.
Form ITR-5 can be used by a partnership firm to file its yearly return of income to meet its Income tax compliances.