Partnership Firm
A Partnership firm is a business entity created by persons who have agreed to share profits or loss of the business. Partnerships are a very good choice of business entity for small enterprises wherein two or more persons decides to contribute to a business and share the profits or losses. In India, Partnerships are widely prevalent because of its ease of formation and minimal regulatory compliance. Also, the concept of LLP was introduced only in 2010, whereas the Partnership Act, 1932 has been in existence before the independence of India. Hence, partnership firms are the most prevalent type of business entity wherein a group of people are involved.
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Types of Partnership
There are two types 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 the finalization and execution of a Partnership Deed between the Partners. The Act does not require the Partnership Deed/Partnership Firm to be registered and in other words, does not require the Partnership Firm to be a registered Firm. Therefore various partnership businesses exist as an unregistered firm.
There are no 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 effects of non-registration of a partnership firm. Some of the disadvantages of an unregistered firm are:
Partner
Enforce a Right
from an agreement can be
instituted in any Court by or on
behalf of a firm against any
third party unless the firm is registered.
Clam Set-off
any of its partners cannot
claim set-off or other
proceedings in a
dispute with a third party.
Difference between LLP & Partnership
Cost
Authority
Limited Liability Protection
Number of Partners
Registration of Partnership Firm
A partnership firm can be registered under Section 58 of the Indian Partnership Act at any time, even subsequent to the formation. The registration of a partnership firm is done through the Registrar of Firm in 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 made in the Register of Firms and Certificate of Registration is issued.
Documents Required for Registration of
Partnership Firm
The application for registration of Partnership Firm must contain the prescribed registration form for incorporation of a company, identity proof/address proof of Partners, certified a true copy of the Partnership deed entered into and proof of the principal place of business.
As identity and address proof of the Partners, any of the following two documents can be submitted:
