Business Formation Services
A partnership is a form of business where two or more people share ownership (Profit/Loss), as well as the responsibility for managing the company and the income or losses the business generates. It can be generated on the stamp paper.
A partnership, as opposed to a corporation, is fairly simple to establish and run. No forms need to be filed or formal agreements drafted (although it is advisable to write a partnership agreement in the event of future disagreements).
Advantages of Forming a Partnership
Simple operating structure
Acquisition of capital
Disadvantages of Forming a Partnership
Conflict with partners
Authority of partners
Vulnerability to death or departure
Limitations on transfer of ownership
A minimum of two Persons is required to start a Partnership firm. A maximum number of 20 Partners are allowed in a Partnership firm.
The Partner must be an Indian citizen and a Resident of India. Non-Resident Indians and Persons of Indian Origin can only invest in a Proprietorship with prior approval of the Government of India.
PAN Card for the Partners along with identity and address proof is required. It is recommended to draft a Partnership deed and have it signed by all the Partners in the firm.
There is no limit on the minimum capital for starting a Partnership firm. Therefore, a Partnership firm can be started with any amount of minimum capital.
MyCorporation Associate will understand your business requirements and help you start a Partnership firm by drafting the Partnership deed. Based on the requirements, MyCorporation can also help register the Partnership deed with the relevant Authorities to make the Partnership Firm a Registered Partnership firm.
To open a bank account for a Partnership firm, a registered Partnership deed along with identity and address proof of the Partners need to be provided.
No, a Partnership firm has no separate legal existence of its own i.e., the Partnership firm and the partners are one and the same in the eyes of law. Liability of the Partners is also unlimited, and the partners are said to be jointly and severally liable for the liabilities of the firm. This means that if the assets and property of the firm is insufficient to meet the debts of the firm, the creditors can recover their loans from the personal property of the individual partners.
If the Partnership firm is registered, the Partnership deed will be registered and a Registration Certificate will be issued by the Registrar of Firms.
Partnership firms are business entity that are owned, managed and controlled by one person. So Partners cannot be inducted into a Partnership firm.
There are restrictions on the transfer of ownership interest in a Partnership firm. A Partner cannot transfer his/her interest in the firm to any person (except to the existing partners) without the unanimous consent of all other partners.
Indian Nationals and Indian Residents are allowed to invest in a Partnership firm without any approval. Usually those who invest in the Partnership firm become a Partner of the firm and in the absence of any agreement to the contrary, all partners will have a right to participate in the activities of the business.
Partnership firm will have to file their annual tax return with the Income Tax Department. Other tax filings like service tax filing or VAT/CST filing may be necessary from time to time, based on the business activity performed. However, annual report or accounts need not be filed with the Ministry or Corporate Affairs, which is required for Limited Liability Partnerships and Companies.
It is not necessary for Partnerships to prepare audited financial statements each year. However, a tax audit may be necessary based on turnover and other criterion.
Yes, there are procedures for converting a Partnership business into a Company or a LLP at a later date. However, the procedures to convert a Partnership firm into a Company or LLP are cumbersome, expensive and time-consuming. Therefore, it is wise for many entrepreneurs to consider and start a LLP or Company instead of a Partnership firm.
MyCorporation provides partnership deed services across India in all cities. We have done partnership registration in Mumbai, Delhi, Gurgaon, Noida, Bangalore, Chennai, Hyderabad, Ahmedabad, Kolkata, Surat, Pune, Jaipur, Lucknow, Kanpur, Nagpur and other Indian cities.