About Partnership Overview
A general partnership refers to an entity formed by two or more people who jointly agree to share profits/losses in a predetermined ratio.
In India, the main law governing the registration of a partnership is the Indian Partnership Registration Act of 1932.
The partnership deed is a legal document used to establish a partnership business registration.
By law, a general partnership is an agreement between people who have agreed to share in the profits obtained from a business transaction conducted in a general partnership. A general partnership can have up to 50 members. It is important to note that members of an undivided Hindu family or a Burmese Buddhist member cannot be part of a general partnership
Learn more about the rules and regulations of general partnerships in the Partnership Act, 1932
Highlights
IDEA
A partnership is a form of business in which 2 or more people can join together to do business.
EASY TRAINING
Partnership businesses can be registered easily and quickly compared to other forms of business.
LOW REGISTRATION COST
Compared to other forms of business, the registration fee for the establishment of a partnership is very low.
TAX BENEFITS
More tax savings than sole proprietorship.
SHARE THE RISK
People with the same business goals can form and share risks and rewards.
COMPLIANCE AND DISCLOSURE
Requires less compliance and disclosure than other forms of business.
Cooperation company features
- Number of Partners: To form a partnership, you need at least two members, and the maximum number that can be joined is 50.
- Voluntary registration: Partnership registration is not required. However, you must get it to enjoy the additional benefits it offers.
- Contract partner: Each partner is bound by a contractual obligation described in the original partnership deed record format, which governs various aspects of the relationship. The deed requires each partner to sign, creating a binding agreement between all parties involved.
- Partner capacity: Minors cannot become partners to form a partnership. Each partner must be an authorized adult.
- Profit and loss sharing: The partners must divide the profits or losses according to the percentage specified in the partnership deed.
- Unlimited Liability: Each partner in a partnership is jointly and severally liable for losses incurred by the partnership.
- Transfer of interest: A partner cannot transfer his or her interest without the approval of all other partners when applying for a partnership.
- Principal - agent relationship: Partnership refers to the principal agency relationship between a company and its partners. As an
agent, each partner is expected to act in the best interests of the business. In addition, any partner
may represent other partners or the entire partnership may act together for business. Relevance of
partnership registration
Registering a general partnership provides unique rights and benefits over an unregistered general partnership.
By registering your partnership, you can sue any partner or the partnership itself to enforce your contractual rights.
However, if your partnership is unregistered, you cannot take legal action to enforce your rights against your partners.
In addition, a registered partnership can sue any third party to enforce their contractual rights, but an unregistered partnership cannot.
In addition, a registered partnership can use clearing or other legal action to enforce its contractual rights, while an unregistered partnership cannot use offsets. except in any legal action against it.
Types of Partnerships in India
- GENERAL PARTNERSHIP: This is the most common type of general partner registration in India. In a general partnership, all partners share the same rights and responsibilities. Each member contributes capital to the company, shares profits and losses and has the right to participate in the management of the company. The liability of each partner is unlimited, which means that he is personally liable for the debts and obligations of the business.
- LIMITED PARTNERSHIP: In a limited partnership, there are two types of partners - general partners and limited partners. General partners have unlimited liability and limited partners have limited liability. Limited partners are not involved in the day-to-day business and are only responsible for the capital they have invested in the business.
- PARTNERSHIP AT WILL: A discretionary partnership is formed without a specific deadline. The partners can dissolve the company at any time by mutual agreement. In this type of partnership, partners can join or leave the company without affecting its continuity.
- LIMITED LIABILITY PARTNER (LLP): A limited liability partnership (LLP) is a type of partnership in which each partner's liability is limited to their contribution to the business. LLPs are governed by the Limited Liability Companies Act 2008. LLPs have a separate legal identity from their partners and their liability is limited to the assets of the business. It is different from the general partnership subscription and you can read more about it:
How do I register a partnership business?
Procedure:-
The whole process takes about 7 working days, including DIN approval, company name and company formation. However, incorporation is now a quick process, allowing all documents to be uploaded to a single online platform. Our experts will help you every step of the way through the online business registration process.
01
CHOOSE A NAME FOR YOUR PARTNERSHIP FIRM
You can choose any name for your general partnership, as long as it complies with the rules set forth
by the Registry of Companies.
Make sure the name you choose is unique and has not been used by another company. Also, avoid
using a government-related name or any other prohibited name.
02
DECISION ON PROFIT SHARE RATE, SOCIAL ADDRESS AND OTHER TERMS OF THE PARTNER
The partners need to decide on the profit and loss ratio, the address of the business in which the business should operate, the investment, the duties and responsibilities of each partner, the terms of entry of the new or withdrawn partner. withdrawal of the former partner and other relevant conditions agreed upon between all partners.
03
DRAFT PARTNERSHIP DEED AS PER PARTNERSHIP ACT 1932
You should hire a professional professional to prepare the partnership deed under the provisions of the Partnership Act 1932. A professional will assist you in purchasing the appropriate stamp paper, printing the deed, obtaining the signature. of all partners in the deed, perform the authentication work and request the registration of the establishment of a partnership
04
YOU SHOULD SUBMIT AN APPLICATION TO REGISTER YOUR PARTNERSHIP FIRM
To register your business as a partnership, you must submit the registration form along with the required fee to the business registry of the state where your business is located. The partnership application must be signed and endorsed by all the general partners or their representatives.
05
GET YOUR CERTIFICATE OF REGISTRATION
Once the business registry has approved your application and supporting documents, your business will be entered in the business registry and you will receive a certificate of registration. The business registry maintains the most up-to-date information on all registered businesses, available to anyone for a fee.
Necessary documents to register the establishment of a partnership
Photos, Aadhar & PAN of all partners
Business address
Form No. 1 (Application for registration under the Law on Partnership).
The original of the partnership deed, signed by all partners.
An affidavit declaring your intention to become a partner.
Apply NowTypes of partners
- ACTIVE PARTNER: An active partner is someone who has entered into a general partnership with the consent of both parties and is actively involved in the management of the business. This partner represents the other partners on all actions taken during the normal life of the company. When an active associate retires, he must publicly notify it so as not to be held liable for any actions of the other associates after his retirement.
- DORMANT PARTNER: An inactive partner in a general partnership registration is a legal partner who is not actively involved in the management of the business. These partners are liable to third parties and participate in the affiliate's profits and losses. They are not required to publicly announce their decision to leave the general partnership.
- PRINCIPAL PARTNER: A senior partner is a nominal partner that engages in business without owning an actual stake in the business. This partner is not eligible to participate in the company's profits, has no interest in the company and is not involved in the management of the company. However, this partner is responsible to other companies for all activities of the company.
- PROFIT-SHARE PARTNER: The registration of a partnership in a partnership enjoys a share of the profits but is not responsible for them. Third parties can only hold such a partner accountable for the actions of the company.
- SUB-PARTNER: A sub-partner is a partner in a deed of partnership that agrees to share the profits of the partnership with a third party. Sub-partners have no rights over the company and are not responsible for its obligations.
- PROSPECTIVE PARTNER: A potential partner is a person who has been accepted as a partner in an established business with the consent of all existing partners. Such an associate is not responsible for any conduct occurring prior to becoming an associate of the Company.
- PREVIOUS PARTNER: General partner leaving the company is a member who leaves the partnership while other general partners are still running the business. Such a partner shall be liable to third parties for all acts of the company until official notice.
- PARTNER BY HOLDING OUT (Article 28): A holding partnership, also known as an estoppel partnership, is when an individual considers himself or herself a partner or allows others to do so. When a person represents himself or herself as a partner in the online registration of a partnership in India, he or she is liable to anyone who has trusted that representative and gives credit to the partnership. office.
Benefits of registering a partnership
MINIMUM COMPLIANCE : One of the biggest benefits of forming a partnership is that it involves minimal compliance work. Compliance can be a burden for many small businesses, especially those just starting out. However, when you form a partnership, you can avoid a lot of that trouble. Unlike LLPs, partnerships are not required to comply with many legal and regulatory requirements. This means you can focus on running your business rather than on compliance.
SIMPLE TO DO PARTNERSHIP FORMATION : A partnership is one of the easiest types of businesses to start. In most cases, all you need is a deed of partnership through the Partnership Incorporation, which is relatively easy to obtain. This means you can establish a partnership quickly and with minimal hassle. On the other hand, applying for an LLP can take several days and you may have to go through a lengthy process to get various approvals and signatures from the MCA.
ECONOMIC COMPARISON : Another advantage of forming a partnership is that it is relatively economical. When you form a
limited liability Partnership, you will have to pay a number of fees, including incorporation fees,
compliance fees, and audit fees. These fees can add up quickly, especially if you're just starting out.
However, forming a partnership is much cheaper. In most cases, all you have to pay is the cost of
applying for a deed of partnership, which is often much less than the costs associated with setting up
a limited liability company.
In conclusion, forming a partnership can be a great option for small businesses in India. With
minimal compliance work, a simple registration process, and relatively low costs, partnerships can
offer many benefits to entrepreneurs looking to start a new business.
Tax compliance after partner registration
- 1. After registering the partnership company, the partners must obtain the PAN and TAN from the income tax department.
- 2. Regardless of business income, ITR filing is required for registered cooperative businesses.
- 3. Registered businesses must pay 30% tax plus surcharge & income tax on their total income.
- 4. Partnership businesses with an annual income of over ₹100 lakhs are required to conduct a tax audit.
- 5. Businesses with an annual income of over ₹40,000 (₹20,000 for the northeastern states) must register for GST, and those involved in e-commerce or import and export must also register.
- 6. After GST registration, businesses need to resubmit GST and TDS back on a monthly or quarterly basis.
- 7. Partners must register for ESIC and file an ESIC declaration.
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- Draft & Execute Partnership Deed
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