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*Government fees & Taxes are as applicable
Documents required for Incorporation:
1. Pan and Aadhaar Card of all Partners
2. Mail id and mobile no. of all Partners.
3. Latest electricity bill
4. NOC from the owner
5. Rent agreement -If Rented (Should be on stamp paper, Notarized and signed)
6. Name of the Owner of the Property
7. Residential address of the owner
What is a Partnership Firm?
Partnership is the relation which subsists between individuals, who have decided to pool their money, skill and resources in business, to share profits and losses, in an agreed ratio.
According to section 4 of the Partnership Act of 1932,"Partnership is defined as the relation between two or more persons who have agreed to share the profits of a business carried on by all or any one of them acting for all". This definition supersedes the previous definition given in section 239 of Indian Contract Act 1872.
The members of a partnership, are jointly known as the partnership firm and severally known as partners.
Common characteristics of Indian Partnership Firms :
The Indian Partnerships have the following common characteristics:
Legal Entity: A partnership firm is not a legal entity apart from the partners constituting it. It has limited identity for the purpose of tax law as per section 4 of the Partnership Act of 1932.
Existence of Business: The existence of a business is an essential feature of partnerships. There can be no formal partnership under the Partnership Act if the partners carry out charitable activities. Section 2 says that business includes any trade, profession or occupation. What is essential is that the firm must work with the intention of earning profits.
Sharing of profit and loss: The main purpose of the partnership business is to share profit in the agreed ratio. However, in the absence of any agreement between partners, the business profits or losses are divided equally among all the partners.
Unlimited Liability: The major disadvantage of partnership is the unlimited liability of partners for the debts and liabilities of the firm. Any partner can bind the firm and the firm is liable for all liabilities incurred by any firm on behalf of the partner. If property of partnership firm is insufficient to meet liabilities, personal property of any partner can be attached to pay the debts of the firm.
Partners are Mutual Agents: The business of firm can be carried on by all the partners or any of them acting for all. Act of any one partner is binding on the firm, i.e., all the partners. Thus, each partner is ‘agent’ of all the remaining partners, i.e, partners are ‘mutual agents.’ Section 18 of the Partnership Act, 1932 says "Subject to the provisions of this Act, a partner is the agent of the firm for the purpose of the business of the firm."
Mutual agency is the real test: The real test of ‘partnership firm’ is ‘mutual agency’ set by the Courts of India, i.e., whether a partner can bind the firm by his act, i.e., whether he can act as agent of all other partners.
Existence of Agreement: The definition of partnership itself makes it clear that there must exist an agreement between the partners to work together and share profits amongst them. The Partnership Act, 1932 nowhere mentions that the Partnership Agreement is to be in written or oral format. Since partnership agreement falls within the purview of contract, the agreement, whether oral or written, between the partners is legally enforceable. A written agreement is, however, advisable to establish existence of partnership and to prove rights and liabilities of each partner, as it is difficult to prove an oral agreement.
Number of Partners is minimum 2 and maximum 50 in any kind of business activities: Since partnership is ‘agreement’ there must be minimum two partners. The Partnership Act does not put any restrictions on maximum number of partners. However, section 464 of Companies Act 2013, and Rule 10 of Companies (Miscellaneous) Rules, 2014 prohibits partnership consisting of more than 50 for any businesses, unless it is registered as a company under the Companies Act, 2013 or formed in pursuance of some other law.
Continuity: Partnership is not perpetual. An ordinary partnership can be dissolved by any of the partners at any time and the process doesn’t require all the partners to agree. Notice of termination can be served by one or more partners.
Automatic dissolution takes place if:
a partnership was formed for a specific term or project which has concluded
one or more partners dies or goes bankrupt
it becomes illegal to carry on the business of the partnership
Further, Death, bankruptcy, retirement or insanity of any partner can lead to dissolution of the partnership. If the remaining partners are willing to continue business operations, they can do so by entering into a fresh agreement.
Competency of Partners : As partnership is essentially a contract, all the individual partners entering into partnership must be legally competent. Thus, minors, insolvent and lunatic persons cannot become partners, although a minor can be admitted to partnership for the purpose of sharing its profits.
Forms of Partnership:
General Partnership: A partnership in which all the partners manage the business and are personally liable for its debts. General partners have an obligation of strict liability to third parties injured by the Partnership. General partners may have joint liability or joint and several liability depending upon circumstances.
Limited Partnership: A partnership in which general partners manage the partnership's operations, and limited partners forego the right to manage the business in exchange for limited liability for the partnership debts. The liability of limited partners is limited to their investment in the partnership.
Professionals like doctors and lawyers often form a limited partnership. Some law and accounting firms make a further distinction between equity partners and salaried partners.
Types of distinguishable partners:
Equity Partner: An equity partner is a part-owner of the business, and is entitled to a portion of the distributable profits proportionate to his share in the business.
Salaried Partner: A salaried partner is one who is paid a salary but does not have any underlying ownership interest in the business. He is not entitled to share its profits but may receive a bonus based on the firm's profitability.
Silent Partner: A silent partner or sleeping partner is one who is not involved in its management but still shares the profits and losses of the business. A silent partner is often an investor in the partnership, who is entitled to share the partnership's profits. Silent partners may prefer to invest in limited partnerships in order to insulate their personal assets from the debts or liabilities of the partnership.
What is Partnership Deed?
Partnership deed is an agreement between the partners that lays down the terms and conditions regulating the partnership, such as, profit and loss sharing ratio, nature of the business, duration of business, duties and obligations of partners, capital contribution by each partner, manner of conducting business and so on.
Need for registration of Partnership:
Voluntary Registration : The registration of partnership is not mandatory, but it is recommended, as it offers certain benefits. For example, in case of any conflict among partners, any partner can file suit against other partner or if there is any dispute between firm and outside party, then also the firm can file a case against that party.
What are the advantages of a Partnership Firm?
The business partnership offers a lot of advantages to those who choose to use it.
Ease of Formation and Closure: A partnership firm can be formed easily (requiring fewer legal obligations) with an agreement between two or more persons to carry some lawful business. Closure of the firm too is an easy task. Simply by agreement of all partners it can be dissolved.
Risk Bearing and Sharing: Starting and managing a business alone can feel stressful and daunting, particularly if you’ve not done it before. In a partnership, business risks are borne and shared by all the partners together. This reduces the burden and stress on individual partners. Partners perform their functions in a better way.
Access to knowledge, skills, experience and contacts: In a partnership, each partner will bring their own knowledge, skills, experience and contacts to the business, potentially giving it a better chance of success than any of the partners trading individually.
Better decision-making: Compared with operating on your own, in a partnership the business benefits from the unique perspective brought by each partner which can collectively contribute towards better decision making.
Privacy: It enjoys greater privacy than a limited company. A firm need not place its books to public scrutiny. It need not get its accounts audited.
Ownership and control are combined: In a limited company, ownership and day to day management of the business is split between shareholders and directors and there may be conflicting issues. In a partnership business, as the owners exercise the control, it is more effective.
More partners, more capital: Easy to raise more capital with the combined benefit to easily bring on board new prospective partners.
What is the minimum and maximum numbers of partners required for formation of a Partnership Firm?
The minimum number of partners a partnership firm must have is two partners. The maximum number of partners prescribed by the Central Government is 50 and u/s. 464 of the Companies Act is 100.
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Important considerations for the purpose of compliances :
It is mandatory for every partnership firm to file the return of income irrespective of amount of income or loss.
E filing of GST returns is to be carried out using EVC or digital signature.
A firm liable to get its account audited under section 44AB shall furnish return electronically under digital signature and shall pay also tax by e-Payment mode.
Types of compliances :
The statutory compliances for partnership firm depend upon various registrations under which the firm is registered. The basic but most important compliances includes:
Preparation of financial statements
Tax audit of accounts, if required
Annual filing of Income Tax Return
Quarterly TDS Return
Monthly/Quarterly/Annual GST Returns
How we make it easy for you through these minimal steps:
Received & solved your query about Incorporation & would guide you through all the further process.
Collecting pending documents from the client's side & then got verified by the legal team & then only we apply the file & updating the client at every step through your convenient mode of communication.
File got approved, updating & sending you the COI & would help you through your further business queries.
Scope of our Services:
A Company Secretary has an important role to play in incorporation of a Private Limited Company. We are ready to serve you through the integrated efforts of our strong team of expert professionals for all your needs pertaining to Incorporation of a Private Limited Company in a systematic and phased manner as outlined below :
Help in applying to RUN (Reserve Unique Name) form to obtain and reserve an appropriate name for the company. This is the first step of incorporating a Private Limited company
We help in applying for DSC and DIN for the directors.
Preparation of all crucial documents, such as, MoA, AoA, financial statements, and other declarations that are required to be filed.
Filing the SPICe form along with prescribed documents.
On receiving a request, our representative shall contact you at the time of your convenience to collect necessary information and documents required for Incorporation of Private Limited Company. He shall act as a front-office Relationship Manager for all communication with you. At the back-office he shall coordinate with our in-house team of professionals comprising of legal experts, Chartered Accountants, Company Secretaries, Document Writers and other junior officers to get the work executed systematically, while remaining in touch with you throughout.
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