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What is Partnership ?

The 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.

What are the Advantages Benefits of Partnership ?

The business partnership offers a lot of advantages to those who choose to use it.

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. More partners, more capital :-  Easy to raise more capital with the combined benefit to easily bring on board new prospective partners.

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.

Forms of Partnership :-

There are two basic forms of partnership :-

1. 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.

2. 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.

How to start a Partnership Business in India ?

A partnership firm can be easily formed as no complex business formalities are required to be fulfilled. Partnership business can be started with just a simple agreement between two or more persons who have decided to pool their money, skills and resources with an intention to start a business and share its profit and losses. The following steps are involved in :-

1. Preparation of Partnership Deed :- Although  partnership deed can be oral, it is generally written to avoid any future conflict. Partnership deed is created on a judicial stamp paper of Rs. 2,000/- and has to be signed by all the partners. It 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.

2. Registration of Partnership deed :- In case partners wish to register the partnership firm, they need to submit partnership deed, ID and address proofs of the firm as well as the partners to the Registrar of Partnerships. With it, an affidavit is also required to be submitted certifying that all the details mentioned in deed and documents are correct.

3. PAN of the firm :- Permanent account Number is required for the purpose of depositing Income tax and filing of statutory returns. For obtaining PAN, form 49A has to be filed online by visiting the website of NSDL or UTIITSL.

4. TAN of the firm :- Tax Deduction or Collection Account Number  is required for the purpose of deducting tax at source or collecting tax at source. For obtaining TAN, form 49B has to be filed online at NSDL-TIN website, viz., https://tin.tin.nsdl.com/tan/index.html.

5. GST Registration :- GST registration can be easily done by filling a form available on the online GST portal, viz. www.gst.gov.in.

For the purpose of GST Registration the following documents are required :-

  • PAN of the Applicant
  • Aadhaar card
  • Proof of business registration or Incorporation certificate
  • Identity and Address proof of Promoters/Director with Photographs
  • Address proof of the place of business
  • Bank Account statement/Cancelled cheque
  • Digital Signature
  • Letter of Authorization / Board Resolution for registering an ‘Authorized Signatory’

Authorized signatory will sign the application either using a digital signature certificate or E-Aadhar verification.

6. MSME Registration :– Udyog Aadhaar Number

7. PF/ESI registration, if applicable

8. Registration under Shop and Establishment Act, if applicable

9. Factory License, if applicable

10. Opening of Current Bank Account :- For opening a current bank account, a firm needs to submit following documents :-

  • Partnership deed
  • Partnership firm PAN card
  • Address Proof of the partnership firm
  • Identity proofs of all the partners
  • Partnership registration certificate (if partnership has been registered)
  • Any registration document issued by central or state government (normally GST certificate is submitted)
  • Copy of electricity bill, telephone bill or water bill (not more than 3 months old)
  • Authorization letter on the letterhead of the firm authorizing a partner as authorized signatory for the bank account

What are the required Documents ?

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.

Our Service Procedure :-

We have standardized the following procedure for rendering our services :-

  1. Receive a request for ‘compliance-related’ services.
  2. Our business advisor will contact you to understand your requirement and shall offer you the best quote in terms of our various service packages. The business advisor shall serve as your single point of contact for all service related requirements.
  3. Once the best package that suits your requirement is selected by you, you shall be required to deposit the initial advance.
  4. Thereafter, you will furnish all desired information and documents as per the checklist which shall have a separate column for specifying whether the document is returnable or not.
  5. A copy of the checklist shall be given to you so that you may also check the documents when they are returned to you.
  6. Our in-house expert shall prepare the final document/return and send the same to you for your approval and signature, generally through online mode.
  7. After receiving the signed documents, they shall be uploaded/submitted for filing of return in question.  
  8. The reference no. generated on filing of return or any other form of acknowledgement shall be shared with you along with soft copies of returns filed by us.
  9. Final GST invoice shall be delivered to you and you shall be required to deposit balance, if any, and to reimburse any other cost incurred by us towards filing of return, such as, any payment challan deposited by us. 
  10. Hardcopies of the returns along with all returnable documents shall be delivered to you after completion of the entire process.

Do you still have few more Questions ?

Let us help!

Not necessarily. However, unless a partnership firm is registered with the registrar of firms and societies, the rights of the partners inter se or against strangers cannot be enforced in a court of law. If the partnership deed itself creates, transfers or affects an interest in immovable property.


No, it is not necessary. However it is often prudent to make a partnership deed to produce to the bank, income tax authorities and to clients with whom the partnership firm deals with.

Yes. A person may become a partner with another for a single adventure or undertaking.

 

Yes. If the number of partners is more than 20, it has to be registered as a company. 


A person may sue a partnership firm but the plaint has to disclose the name of all the partners who constitute the firm. However under the Income Tax Act, a firm can be assessed to tax independently of its partners. A partnership firm therefore enjoys a quasi independent status.


Yes. The law presumes that each partner is an agent of the other and dealing in good faith with one partner binds the other partners as well. There are certain exceptions to this rule, which is answered in the next question.

 

Yes. The death of a partner automatically dissolves the partnership firm. It is however usual for the partnership deed to provide before hand that the firm should continue in spite of death, retirement or insolvency of a partner. 


When the partnership deed does not contain any provision for the duration of the partnership nor conditions for the termination of partnership, it is a partnership at will.

 

Scope of Our Services :-

Several back to back registrations are required for starting a partnership business, most of which are interconnected to one another. It is highly recommended that you seek the help of a professional for starting a partnership business in an expeditious, smooth and hassle-free manner. We are just a phone call away to serve you for all your needs in this regard.

Upon receipt of your call, our business advisor shall arrange a meeting with you at your time of convenience. During the meeting he shall explain you the whole process of starting a partnership business and thereafter obtain all necessary details pertaining to proposed business, office address, nature of business/activity, name of the partners, each partner’s initial contribution to capital, profit sharing ratio, duration of business, duties and obligations of partners, manner of conducting business and so on. He shall also guide you about various registrations that shall be required to start the partnership business. Depending upon the different registrations you may require, he shall collect all relevant details on pre-printed data entry forms specially designed by us for this purpose along with copies of all necessary documents as per the check list provided.

The information so collected along with the documents shall be forwarded to our team of experts comprising of document writers, legal experts, tax professionals and practitioners, CA, CS etc. who shall work in tandem with each other for preparation of the partnership deed, and if required, for its registration, and for obtaining various other registrations as required by you. The entire process takes about 30 working days under normal business conditions.

Why Filing Door Stands Out ?

 

   Strong team of qualified experts – Our strength in matters related to Incorporation of a Private Limited Company is attributed to our team of highly qualified and experienced working professionals from different disciplines, including legal experts, Chartered Accountants, Company Secretaries, Document Writers etc. who work in tandem with each other and are assisted by junior officers.

 

⇒  Smooth and seamless interaction – We endure to provide our best services in all matters relating to Incorporation of Private Limited Company, by ensuring smooth and seamless interaction with you preferably through digital communication mode to save your time and efforts.

 

⇒  The entire process is digitized – We have digitized the entire process of Incorporation of Private Limited Company using a dedicated software comprising a comprehensive checklist to ensure that all the obligations are fulfilled at each stage within the prescribed due time. Using this software, we are able to provide end to end services on all aspects relating to Incorporation of a Private Limited Company in a systematic manner. We also have specially designed data-entry forms which are essentially replicas of various e-forms prescribed for Incorporation of a Private Limited Company and shall be shared with you online for filling in the desired details under assistance from our team.

 

⇒  Regular Updating – The names and contact details of all our esteemed clients are preserved in a database which enables us to send them updates on new policies and regulations whenever they are announced, through SMS/WhatsApp/E-mail entirely free of cost.

 

 ⇒  Total Business Solution – We provide service assistance in each and every aspect of doing business whether in relation to its establishment or its working as well as undertake to provide total business solution on turnkey basis.     

 

    FilingDoor is India’s most trusted technology-driven legal advisory and tax filing platform that ensures a smooth transition of accounting operations for startups and established businesses. Found in the year 2017, FilingDoor is based in Delhi and has successfully assisted 5000+ clients till now. Some of our core services include government registrations & filings, accounting, documentation, and annual compliances. We aim to offer hassle-free legal consultancy and tax-related services to individuals and businesses.

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    Plot no 2a, kh no 294 first floor kehar singh state, Lane Number 2, Saidulajab, Saket, Delhi 110030

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