Partnership Firm

1. Partnership Firm The law relating to partnership firm registration in India is prescribed in the Indian Partnership Act of 1932. This Act lays down the rights and duties of the partners between themselves and other legal relations between partners and third persons, which are incidental to the formation of a partnership. Thus, the Act establishes the position of a partner as well as a partnership firm vis-à-vis third parties, in legal and contractual relations arising out of and in the course of the business of a partnership firm. In this article, we look at the various aspects of running a partnership firm in India in detail. Partnership A partnership is a relationship between individuals who have agreed to share the profits of a business carried on by all or any one of them acting for all as stated in Section 4 of the Indian Partnership Act. Therefore, a partnership consists of three essential elements. 1. A partnership must be a result of an agreement between two or more individuals. 2. The agreement must be built to share the profits obtained from the business. 3. The business must be run by all or any of them representing the rest. All these conditions must coexist before a partnership can come into existence. Essential Elements of a Partnership Some key elements are required for the formation of a Partnership. They are listed below with a brief explanation. An Agreement A partnership is the result of an agreement between two or more persons. It should be noted that this sort of a deal can arise only from a contract and not from status. This is why a partnership is distinguishable from a Hindu Undivided Family carrying on family business. The reason is that this kind of an alliance is a creation only out of a mutual agreement. Thus, the nature of a partnership is voluntary and contractual. An agreement from which a partnership relationship arise may be express. It may also be implied from the Partnership Act done by the partners and from a consistent course of conduct being followed, showing a mutual understanding between them. This agreement may be in oral or in writing.

2. Sharing Profit of Business When it comes to sharing profits of the business, two propositions are to be considered. Firstly, there must be a business that exists. For this purpose, the term ‘business’ would generally mean every trade, occupation, and profession. The existence of a company is crucial. The motive of a business is the “acquisition of gains” that leads to the formation of a partnership. So, there can be no partnership where there is no intention to carry on a business and to share the profits obtained from the same. For example, co-owners who share the rent derived from a piece of land are not considered partners as a business does not exist. Similarly, no charitable institution or club may be called a partnership. However, a Joint Stock Company may be floated as a partnership for non-economic purposes. Secondly, there must be an agreement concerning the sharing of profits. For example, A and B buy certain bales of cotton which they agree to sell on their joint account and to share the benefits equally. In such a situation, A and B are partners in respect to the business they have planned out. However, an agreement to share the losses is not an essential element that is considered. However, in the event of damages, unless agreed otherwise, these must be borne in a profit-sharing ratio. Running the Business The third requirement for a partnership is that the business must be carried on by all the partners or by one or more of the partners acting for all. This is the crucial principle of the partnership law. An act of one partner in the course of the business of the firm is, in fact, an act of all partners. A partner carrying on a business is the principal as well as the agent for all the other partners. Therefore, it should be noted that the real test of a partnership is a mutual agency rather than sharing of profits. If the element of interactive agency is absent, then there will be no partnership. Sharing of benefits is the only Prima Facie evidence which can be rebutted by stronger evidence. This, this prima facie evidence can be countered by proving that there is no mutual agency. Dstinction between Partnership and Firm Individuals who have entered into a partnership with one another are called Partners individually. The partners may be called collectively as the name under which the business is carried on is called the name of the Firm. A partnership is merely an abstract legal relationship between the partners. A firm is a concrete object signifying the collective entity for all the partners. Thus, a partnership is an invisible bind that holds the partner together, and a firm is the visible form of this partnership which is, therefore, bound together. Eligibility Criteria for Partnership Registration in India

3. Following is the eligibility criteria for register a partnership in India. ● There is a minimum of two partners ● The partners may or may not share the responsibilities of the business. ● Risk is shared in a partnership form ● All the partners should agree to the terms mentioned in the partnership deed. Benefits of a Partnership Minimum Compliance For general partnerships, there is no need for an auditor to be appointed or, if the company is still in the process of partnership firm registration or is still unregistered, annual accounts filing with the registrar is not necessary either. Annual compliances are also lower when compared to an LLP. Simple To Begin A general partnership can be formed within 2-4 business days, with an unregistered deed of partnership. However, registering for the event offers its own set of benefits. Comparatively Economical A general partnership is substantially less expensive to start than an LLP. It will still be cost effective in the long term because the compliance needs are minor. Documents Required for Partnership Registration in India Following are the documents required for partnership firm registration in India: ● Application for partnership firm registration in the prescribed Form – I. ● Duly filled Specimen of Affidavit. ● Certified copy of the Partnership deed on appropriate non-judicial stamp paper. ● Proof of ownership of the place of business or the rental/lease agreement thereof. ● Affix court fee stamp & payment of prescribed partnership firm registration fee by demand draft.

4. Process for Partnership Registration in India The partnership firm registration process varies from state to state. In some regions, you can get the partnership registration online. However, in most cases, the incorporation process is still offline. The reason behind this is the age of the Partnership registration act. It was established in 1932 and have not gone through any changes since then. Thus, the process of partnership company registration that you must follow is: 1. First, partners are appointed for the process. 2. The first draft of the partnership deed is created. 3. Changes are made to the draft as per the requirement of the partners 4. Application is filed to the partnership registrar’s office you can submit the partnership deed registration online if your state allows it). 5. The registrar assesses the partnership deed and the application. 6. A partnership registration certificate is granted and the partnership deed is certified. After you have procured the partnership firm registration certificate, your start your business operations right away. The process of partnership firm registration is not an easy one. Therefore, the experts of CA Goyal Mangal & Co. help you in any way necessary. Through our partnership registration facilities, you can start your business as a partnership firm in no time. Our Assistance in Partnership Registration in India We, at CA Goyal Mangal & Co., provide end-to-end solutions for Partnership firm registration in India. Our services include: ● Collection of basic information. ● Drafting the partnership deed. ● Reviewing the application and making changes if needed ● Submitting the final deed and filing the partnership registration application. cagmc.com is a leading legal consultancy firm providing comprehensive services relating to partnership registration. Our expert team will provide you full-fledged assistance required for the seamless registration of a Partnership firm.