Partnership Firm

What is Partnership Firm?

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.

Advantages of Partnership Firm

1. Easy Formation
2. Low Compliances
3. Shared Profit & Loss
4. Quick Decision

Disadvantages of Partnership Firm

1. Potential Liabilities
2. Limited Resources
3. Difficult to raise fund
4. A loss of autonomy
5. A lack of stability
6. Higher taxes
7. Splitting profits

Its Partnership Firm Structure

Details	A person may become a partner with another person in particular adventures or undertakings.
Minimum no of Member	2
Compliance	Low
Obtaining Fund	Challenging
Tax Rate	@30%

Required License for Partnership Firm

Steps to register Partnership Firm

Step 1 – Application for Registration

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

Step 2 – Every partner needs to verify and sign the concerned application.

Step 3 – 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

MUTUAL RIGHT AND LIABILITIES.

Subject to contract between the partners –

• a partner is not entitled to receive remuneration for taking part in the conduct of the business
• the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm
• where a partner is entitled to interest on the capital subscribed by him, such interest shall be payable only out of profits
• a partner making, for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six per cent. per annum
• the firm shall indemnify a partner in respect of payments made and liabilities incurred by him
• in the ordinary and proper conduct of the business and
• in doing such act, in an emergency, for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances and
• a partner shall indemnify the firm for any loss caused to it by his willful neglect in the conduct of the business of the firm.

APPLICATION OF THE PROPERTY OF THE FIRM.

Subject to the contract between the partners, the property of the firm shall be held
and used by the partners exclusively for the purposes of the business.

PERSONAL PROFITS EARNED BY PARTNERS.

Subject to the contract between the partners

• if a partner derives any profits for himself from any transaction of the firm, or from the use of the property or business connection of the firm or the firm-name, he shall account for that profit and pay it to the firm
• f a partner carries on any business of the same nature as and competing with that of the firm, he shall account for and pay to the firm all profits made by him in that business.

PARTNER’S AUTHORITY IN AN EMERGENCY.

A partner has authority, in an emergency, to do all such acts for the purpose of protecting the firm from loss as would be done by a person of ordinary prudence, in his own case, acting under similar circumstances, and such acts bind the firm.

LIABILITY OF THE FIRM FOR WRONGFUL ACTS OF A PARTNER.

Where, by the wrongful act or omission of a partner acting in the ordinary course of
the business of a firm or with the authority of his partners, loss or injury is caused to
any third party, or any penalty is incurred, the firm is liable therefor to the same
extent as the partner.

RIGHTS OF TRANSFEREE OF A PARTNER’S INTEREST.

A transfer by a partner of his interest in the firm, either absolute or by mortgage, or, by the creation by him of a charge on such interest, does not entitle the transferee, during the continuance of the firm, to interfere in the conduct of the business or to require accounts or to inspect the books of the firm, but entitles the transferee only to receive the share of profits of the transferring partner, and the transferee shall accept the account of profits agreed to by the partners.

If the firm is dissolved or if the transferring partner ceases to be a partner, the transferee is entitled as against the remaining partners, to receive the share of the assets of the firm to which the transferring partner is entitled and, for the purpose of ascertaining that share, to an account as from the date of the dissolution.

List of Required Documents for Partnership Firm

• PAN of all Partners
• Aadhar of all Partners 
• Photo of all partners
• Mobile No of Partners
• Email of all Partners
• Trade Name 
• Light Bill ( With Owner PAN & Aadhar)
• Rent agreement if any 
• Nature of business

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