PARTNERSHIP FIRM ?

A Partnership is one of the most important forms of a business organization, where two or more people come together to form a business and divide the profits thereof in an agreed ratio.

In simple terms, a public company is a company whose shares can be subscribed by members of the public. As per the Companies Act, 2013 a public company is A Partnership is easy to form, and the compliance is minimal as compared to companies. A firm or company established between two or more partners with the goal of earning profit is called as a Partnership Firm. It is not compulsory to register a partnership firm but there are added advantages if a partnership firm is registered. Partnership deed is the legal document which is created to form a partnership firm. Indian Partnership Act 1932 is the governing law which regulates the partnership firms in India. As per the act “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all”. Maximum number of members in a partnership is 10 for a banking business and 20 for other businesses to enter into a partnership firm. Partnership firms are not separate legal entity while the partners are. A partnership firm cannot be debtor or creditor and cannot own a property. The property, debit or credit of a partnership firm is actually for the partners in the eyes of law. The manner in which profits or losses are to be shared amongst partners must be explicitly mentioned in the partnership deed to avoid any confusions in the future. Every partner can carry on business on behalf of others. A partnership firm would be dissolved if the number of partners reduces below 2 in case of death, incapacitation or resignation of a partner.

Partnership deed is an agreement between the partners in which rights, duties, profits shares and other obligations of each partner is mentioned. Partnership deed can be written or oral, although it is always advisable to write a partnership deed to avoid any conflicts in the future.

Following details are required in a partnership deed:

A. General Details:

1. Name and address of the firm and all the partners.

2. Nature of business.

3. Date of starting of business Capital to be contributed by each partner

4. Capital to be contributed by each partner

5. Profit/loss sharing ratio among the partners

B.Specific Details:

Apart from these, certain specific clauses may also be mentioned to avoid any conflict at a later stage:

1. Interest on capital invested, drawings by partners or any loans provided by partners to firm.

2. Salaries, commissions or any other amount to be payable to partners.

3. Rights of each partner, including additional rights to be enjoyed by the active partners

4. Duties and obligations of all partners

5. Adjustments or processes to be followed on account of retirement or death of a partner or dissolution of firm.

6. Other clauses as partners may decide by mutual discussion.

Partnership Firms registration

Indian Partnership Act, 1932 governs the partnerships. Registration of partnership firm is optional and at the discretion of the partners. Registration of partnership firm may be done at any time – before starting a business or anytime during the continuation of partnership. It is always advisable to register the firm since registered firms enjoy special rights which aren’t available to the unregistered firms. The registration of Partnership Firm in India can take up to 12 to 14 working days. However, the time taken to issue a certificate of incorporation may vary as per the regulations of the concerned state. The registration of Partnership Firm is subject to Government processing time which varies for each State. Often, if the partnership agreement is not registered, the court may deem a partnership invalid. If the object of the business is illegal, the court may consider the partnership invalid and dissolve the partnership. If the partners of a firm wish to end the partnership, they can do so by dissolving the partnership by notice, if it is a partnership of will. A partnership can be dissolved in accordance with the terms laid out in the Partnership Deed, or they can do so creating a separate agreement. In a certain sense, a partnership certification of incorporation can be revoked, this often termed as dissolution. A dissolution can be brought upon automatically when all partners or all partners except one partner are declared insolvent or if the firm is carrying unlawful activities, i.e. like trading in drugs or other illegal products, corporate malpractice or making business engagements with countries that may harm the interest of India. Every partner is jointly liable with all the other partners and also individually, for all acts/activities of the firm, during the course of business while he/she is a partner. This means that if a loss or injury is caused to any third party or a penalty is levied during the course of business all partners will be held liable even if the injury or loss was caused by one of the partners.

Documents to be submitted to Registrar

• Application for registration of partnership (Form 1)

• Specimen of Affidavit

• Certified original copy of Partnership Deed

• Proof of principal place of business (ownership documents or rental/lease agreement)

An application form along with fees is to be submitted to Registrar of Firms of the State in which firm is situated. The application has to be signed by all partners or their agents. If the registrar is satisfied with the documents, he will register the firm in Register of Firms and issue Certificate of Registration. Register of Firms contains up-to-date information on all firms and can be viewed by anybody upon payment of certain fees.