Partnership
Plans starting Rs 1,220/- only*
*T&C Apply. Excludes all Govt Fees and Taxes
Plans starting Rs 1,220/- only*
*T&C Apply. Excludes all Govt Fees and Taxes
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Partnership Registration
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Partnership Registration
Basic Plan
- Scope of Business
- Documentation Preparation
- Partnership Deed Draft
Advanced Plan
- Partnership Deed Submission
- Pan Card Application
- GST Certificate
- Everything in Basic
Partnership Firm Registration
Partnership firm registration in India involves formally establishing a business entity owned and managed by two or more individuals, known as partners. Although registration is not mandatory, it is recommended for legal recognition and clarity. The process includes drafting a partnership deed, which outlines the terms and conditions of the partnership, and submitting it along with required documents (identity proofs, address proof, and partnership deed) to the Registrar of Firms. Upon approval, a registration certificate is issued, providing legal status to the firm. Registration helps define roles and profit-sharing ratios, enhances credibility, and facilitates access to financial services.
1. Legal Recognition
- Credibility: A registered partnership firm enjoys legal recognition, which enhances credibility with clients, vendors, banks, and financial institutions.
- Protection of Rights: Registration provides legal protection to partners in case of disputes, enabling the firm to sue or be sued in its name.
2. Flexibility in Management
- Simple Structure: Partnership firms have a flexible management structure, allowing partners to decide how to run the business based on the terms outlined in the partnership deed.
- Quick Decision Making: Partners can make decisions collectively without much bureaucracy, leading to faster and more efficient operations.
3. Easy Formation
- No Complex Formalities: Registering a partnership firm is simple and involves fewer legal formalities compared to other business entities like private limited companies or LLPs.
- Cost-Effective: The cost of registering and maintaining a partnership firm is generally lower than other legal entities.
4. Low Compliance Requirements
- Fewer Regulatory Requirements: Compared to companies, partnership firms face fewer compliance burdens, such as no mandatory audits (unless specified by tax laws) and minimal reporting to authorities.
5. Shared Responsibility and Risk
- Risk Sharing: In a partnership, the risks and liabilities are shared among the partners, reducing the burden on a single individual.
- Capital Pooling: Partners can pool resources, expertise, and finances, making it easier to raise capital for the business.
6. Tax Benefits
- Tax Flexibility: Partnership firms are taxed as a separate entity, and profits are only taxed once at the firm level. Partners are taxed on their share of profits, avoiding double taxation.
- Deductions: Partners’ salaries, interest on capital, and other expenses can be deducted from the firm’s income, reducing overall tax liability.
7. Better Access to Loans
- Ease of Obtaining Loans: Registered partnership firms find it easier to obtain business loans or overdraft facilities from banks due to their legal status and formal structure.
- No Audit Requirements: Partnerships are not subject to mandatory audit requirements unless specified under tax laws, simplifying financial reporting.
8. Flexibility in Ownership
- Easy Changes in Partnership: Adding or removing partners is relatively straightforward, provided the partnership deed allows for such changes. This flexibility helps in adapting to the business’s changing needs.
9. Ease of Dissolution
- Simple Closure: Dissolving a partnership firm is relatively easy and requires fewer legal formalities, making it an ideal choice for businesses that may not plan for long-term operations.
10. Personal Connection
- Client Trust: Clients often prefer dealing with partnerships due to the direct involvement of the partners, leading to more personalized business relations.
1. Partnership Deed
A partnership deed is the core legal document that outlines the terms and conditions of the partnership. It must be executed on stamp paper of the appropriate value (varies by state).
Key Inclusions:
- Name and address of the firm and partners.
- Nature of business.
- Profit-sharing ratios.
- Capital contributions.
- Responsibilities and duties of partners.
2. PAN Card for the Firm
- Purpose: A PAN (Permanent Account Number) for the partnership firm is required to conduct business, file taxes, and open a bank account.
3. GST Registration (If Applicable)
- Required For:
- Firms with annual turnover exceeding ₹40 lakhs (₹20 lakhs for certain states).
- Firms involved in interstate trade.
- Purpose: To collect and file Goods and Services Tax (GST) on sales of goods or services.
4. Trade License
- Required For: Operating a business in a particular location.
- Issuing Authority: Local municipal authority or state government under the Shop and Establishment Act.
- Purpose: Ensures that the business is following local regulations related to commercial establishments.
5. Udyam Registration (MSME Registration)
- Required For: Micro, Small, and Medium Enterprises (MSMEs) to avail government benefits such as subsidies, easier access to loans, etc.
- Issuing Authority: Ministry of Micro, Small, and Medium Enterprises.
6. Professional Tax Registration (If Applicable)
- Required For: Firms located in states that levy professional tax, such as Maharashtra, Karnataka, West Bengal, etc.
- Issuing Authority: State government.
- Purpose: It is a tax on employees and businesses based on income.
7. Shop and Establishment Act License
- Required For: Businesses operating from commercial establishments like shops or offices.
- Issuing Authority: Local municipal authority or state labor department.
- Purpose: To regulate working hours, conditions, and wages of employees.
8. No Objection Certificate (NOC) from Property Owner
- Required For: If the business operates from a rented property.
- Purpose: The property owner provides permission to use the premises for business purposes.
9. FSSAI License (If Applicable)
- Required For: Firms involved in the food business, such as manufacturing, processing, packaging, or distributing food items.
- Issuing Authority: Food Safety and Standards Authority of India (FSSAI).
- Purpose: Ensures food safety and compliance with food safety standards.
10. Import Export Code (IEC) (If Applicable)
- Required For: Firms involved in the import or export of goods or services.
- Issuing Authority: Directorate General of Foreign Trade (DGFT).
- Purpose: Enables international trade activities.
11. Pollution Control License (If Applicable)
- Required For: Firms operating in sectors that may cause pollution, such as manufacturing units or industries.
- Issuing Authority: State Pollution Control Board.
- Purpose: Ensures compliance with environmental regulations.
Partnership firms in India are required to comply with several legal and regulatory requirements to ensure smooth operations and avoid penalties. The following are the key compliances that a partnership firm must adhere to:
1. Income Tax Compliance
- PAN Card: The partnership firm must obtain a PAN (Permanent Account Number).
- Income Tax Return Filing: Partnership firms are required to file income tax returns annually under the Income Tax Act, 1961. The return is filed using Form ITR-5.
- Advance Tax: If the firm’s tax liability exceeds ₹10,000 in a financial year, advance tax payments must be made quarterly.
- Tax Audit: If the turnover of the partnership firm exceeds ₹1 crore (for businesses) or ₹50 lakh (for professionals), a tax audit is mandatory under Section 44AB of the Income Tax Act.
2. Goods and Services Tax (GST) Compliance
- GST Registration: If the firm’s annual turnover exceeds ₹40 lakh (or ₹20 lakh in certain states), GST registration is mandatory. Additionally, firms engaged in interstate trade must register for GST.
- GST Returns: Registered firms must file regular GST returns, including GSTR-1, GSTR-3B (monthly or quarterly), and GSTR-9 (annual return).
- GST Payment: Timely payment of GST collected from customers is required to avoid penalties.
3. Professional Tax Compliance (If Applicable)
- Professional Tax Registration: In certain states (such as Maharashtra, Karnataka, and West Bengal), professional tax registration is mandatory for both the partnership firm and its employees.
- Professional Tax Payment: Professional tax must be paid periodically (monthly or annually) as per the state’s regulations.
- Returns Filing: Professional tax returns must be filed as per state-specific deadlines.
4. Filing of Annual Accounts
- Books of Accounts: Partnership firms must maintain accurate financial records, including books of accounts, profit and loss statements, and balance sheets.
- Audit of Accounts: While auditing is not mandatory for all partnership firms, firms with a turnover exceeding the prescribed limits under tax laws must undergo a statutory audit.
5. TDS (Tax Deducted at Source) Compliance
- TDS Deduction: Partnership firms must deduct TDS when making certain payments such as salaries, rent, and contractor fees if they exceed specified thresholds.
- TDS Return Filing: The firm must file TDS returns quarterly and issue TDS certificates to payees.
6. Compliance under the Partnership Act, 1932
- Partnership Deed: The firm should maintain an updated partnership deed, which must be registered with the Registrar of Firms for legal protection.
- Changes in Partnership: Any changes in the partnership (e.g., addition or removal of partners) must be recorded in the partnership deed and notified to the Registrar of Firms.
7. Renewal of Business Licenses
- Trade License: The firm may need to renew its trade license annually, as per the regulations of the local municipal authority.
- Shops and Establishment Act License: The firm must comply with the provisions of the state’s Shops and Establishment Act, including maintaining records of employees and renewing the license periodically.
8. Labor Law Compliance
- Provident Fund (PF): If the firm employs 20 or more employees, it must register under the Employees' Provident Fund Act and contribute to the employee’s provident fund.
- ESI (Employee State Insurance): If the firm employs 10 or more employees, it must register under the Employees' State Insurance Act, and contribute to the employees’ ESI.
- Minimum Wages and Working Conditions: Firms must comply with the provisions of the Minimum Wages Act, Payment of Gratuity Act, and other labor laws related to employee welfare.
9. Record Maintenance
- Minutes of Meetings: Although not mandatory, maintaining records of meetings between partners, especially on critical business decisions, can be helpful for governance and compliance.
- Partner Changes: If there are any changes in the partnership (like induction or retirement of a partner), the firm must update its records and inform the Registrar of Firms.
10. Compliance for Specific Businesses
- FSSAI Registration: For partnership firms involved in the food industry, FSSAI (Food Safety and Standards Authority of India) registration or licensing is mandatory.
- Other Industry-Specific Licenses: Depending on the nature of the business, additional licenses (e.g., pollution control certificates, import-export licenses) may be required.
11. Annual ROC Filing (Optional)
- Although partnership firms are not mandatorily required to file annual returns with the Registrar of Companies (ROC), it is optional if the firm wishes to convert into an LLP (Limited Liability Partnership) or a company later on.
12. Compliance for MSMEs (Optional)
Udyam Registration: If the partnership firm qualifies as a Micro, Small, or Medium Enterprise (MSME), it can register under the Udyam Registration portal to avail benefits like subsidies and easier access to loans.