To start a Partnership firm, partners got to enter into an agreement which is popularly referred to as Partnership Deed. Different states impose different stamp tax on the partnership agreements/deeds, it means while creating a partnership instrument (Deed) the partners must purchase stamp paper of appropriate value as could also be applicable within the respective state, to be annexed with the agreement. An agreement can further be notarized. Though registration of partnership Firm isn't mandatory under The Partnership Act, 1932, however, section 69 of the act specifies the effect of Non-Registration, consistent with that an unregistered firm shall not be ready to recover any sum quite Rs. 100. Hence, it's strongly recommended to register the partnership firm with the registrar of firms (ROF). Our quality services and experience will help you to Start your Partnership Firm easily. We InternationalTaxations.com will help you to register your partnership firm across India. We will support in Documentation, Preparation, filing and subsequent Follow-up with the registrar of firms.
There are two kinds of Partnership, registered Partnership and unregistered Partnership. In terms of the Indian Partnership Act, 1932, (Act), the only criterion to commence business as a partnership is that the finalization and execution of a Partnership Deed between the Partners. The Act doesn't require the Partnership Deed/Partnership Firm to be registered and in other words, doesn't require the Partnership Firm to be a registered Firm. Therefore various partnership businesses exist as an unregistered firm.
There aren't any penalties for non-registration of a partnership firm, and a partnership firm can even be registered after formation. However, unregistered partnership firms have certain rights denied in Section 69 of the Partnership Act, which deals with the results of non-registration of a partnership firm. variety of the disadvantages of an unregistered firm are:
A partner of an unregistered firm cannot file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act.
No suit to enforce a right arising from an agreement are often instituted in any Court by or on behalf of a firm against any third party unless the firm is registered. An unregistered firm or any of its partners cannot claim set-off or other proceedings during a dispute with a third party.
Therefore, any partnership should be registered sooner or later.
Cost: the value for registration of LLP is generally above the value for registration of a partnership firm. LLP registration are often completed online through IndiaFilings at just Rs.5899. Partnership registration are often completed online through IndiaFilings at just Rs.5899.
Authority: LLPs are registered in India under the Ministry of Corporate Affairs, Central Government. Partnership firms are registered with the Registrar of Firms, Controlled by the respective government during which the firm is registered.
Limited Liability Protection: the most advantage of a indebtedness Partnership over a standard partnership firm is that in an LLP, one partner isn't responsible or responsible for another partner's misconduct or negligence. An LLP also provides indebtedness protection for the owners from the debts of the LLP. However, unlike private Ltd. shareholder, the partners of an LLP have the proper to manage the business directly.
Number of Partners: LLPs and Partnership Firms must have a minimum of two partners to be registered. Post incorporation, an LLP can have unlimited partners. just in case of a Partnership Firm, if the amount of partners at any time reduces below the mandatory minimum of two thanks to death, incapacitation or resignation of a Partner, the partnership firm would stand dissolved. On the opposite hand, just in case of an LLP, if the amount of Partners reduces below 2, the only Partner can still find a replacement Partner to fill the position without dissolution of the LLP.
A partnership firm are often registered under Section 58 of the Indian Partnership Act at any time, even after the formation. The registration of a partnership firm is completed through the Registrar of Firm during which the partnership firm is situated. When the Registrar of Firms is satisfied that the provisions of Section 58 are complied with, a record of entry of the statement is formed within the Register of Firms and Certificate of Registration is issued.
The application for registration of Partnership Firm must contain the prescribed registration form for incorporation of a corporation , identity proof/address proof of Partners, certified a real copy of the Partnership deed entered into and proof of the principal place of business.
One of the most advantages of a Partnership Firm is that there are very minimal requirements in terms of compliance. as an example , a corporation or LLP requires the annual filing of its financial statements with the Registrar of Companies. Such documents filed with the MCA also are made public documents. On the opposite hand, registered/unregistered Partnership Firms aren't required to file any annual returns, and therefore the financial statements of a partnership firm wouldn't be made publicly available. Also, the accounts of a registered / unregistered partnership firm aren't required to be audited. Whereas, the accounts of a indebtedness Partnership (LLP) are required to be audited by a practising accountant when the turnover exceeds Rs.40 lakhs once a year or when capital contribution exceeds Rs. 25 lakhs
Partnership firm doesn't provide its Partners with indebtedness protection and doesn't have perpetual existence. Also, the interest of a Partner during a Partnership firm isn't easily transferrable, and therefore the ownership structure doesn't leave investment from Angel Investors, Venture Capitalists or Private Equity Firms. Banks / Financial Institutions also like better to lend to Companies than Partnership Firms as Companies are separate entities and therefore the regulatory requirement for financial reporting of Companies - makes a corporation more transparent and structured.
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Partnership firms could also be assessed either as a partnership firm or as an association of persons (AOP). Interest paid to partners, salary, bonus, commission, or remuneration to a partner are going to be allowed as a deduction paid to a working partner who is a private . However, when the Partnership Firm is assessed as an AOP, the above deductions can't be claimed. Therefore, for a partnership firm, it's more advantageous to be assessed as a partnership firm than as an AOP. For a partnership to be assessed as a firm, the partnership should be evidenced by a written partnership deed. tax return of a partnership firm is filed in Form ITR-5.