A Partnership Firm is a business structure where two or more persons or an association of people own, manage & operate a business in accordance with the terms and objectives stated in the Partnership Deed. It is thought to have lost its relevance since the introduction of the Limited Liability Partnership (LLP) because in partnership, the partners are liable for the debts of the business due to unlimited liability. However, being inexpensive, the ease of setting up and fewer compliance formalities make it a practical option for some.
A partnership firm is considered ideal for micro and small-scale business which have multiple promoters.
Also, General Partnerships can be either registered or unregistered. Though it is not mandatory to register a Partnership firm, it is preferred to register a Partnership firm due to the added benefits.
REASONS TO OPT FOR A PARTNERSHIP FIRM
- Form No. 1 (Application for registration of the firm under The Indian Partnership Act)
- Original copy of Partnership Deed, duly signed by all concerned partners.
- Affidavit declaring an intention to become a partner.
- Rental or lease agreement of the property on which the business is set up.
IMPORTANT FACTORS TO BE CONSIDERED IN A PARTNERSHIP DEED
The deed should have the names of the partners and their respective addresses, the name of the partnership firm, the date of commencement of operation of the firm, capital invested by each partner, the type of partnership concerned, the profit-sharing ratio, and rules and regulations that need to be followed for intake or removal of partners.
- Application for partnership registration includes the following:
- Name of the firm.
- Name of the place where business is carried.
- Names of any other place where business is carried on.
- Date of partners joining the partnership firm.
- Full name and permanent address of partners.
- Duration of the firm.
- Every partner needs to verify and sign the concerned application.
- Ensure that the following documents and prescribed fees are enclosed with the application:
- Application for Registration in the prescribed form.
- Duly filled Specimen of Affidavit.
- Certified copy of the Partnership deed.
- Proof of ownership of the place of business or the rental agreement.
Once the Registrar of Firms is satisfied that the application procedure has been duly complied with, it shall record an entry of the statement in the Register of Firms and issue a Certificate of Registration to the partnership firm.