Partnership Firm Registration is one of the forms of business entity for which two or more than two people are required. These types of firms are good for the mid-sized as well as small size businesses. In India there are two types of partnership firms. First one is the regular partnership firms which are governed by the Partnership Act of 1932 and the second one is the evolved version of the regular partnership firm that is known as Limited Liability Partnership Firms. LLPs have all the qualities like corporate bodies and they are governed by the Limited Liability Partnership Act of 2008. The current blog is fully dedicated to the registration of a partnership firm. It’s up to the business owner under which partnership firm he or she wants to register his or her business. To decide the same one must be aware about the various things regarding them which has been discussed below in the present write-up.
What are the Two Types of Partnership Firms?
Generally there are two types of Partnership firms which has been discussed or mentioned below:
Regular Partnership Firm
It has been in existence since 1932, or even before that. But before 1932 it was not recognized by any codified law. Such firms are formed with the help of two or more than two partners. Such entities cannot be formed with a single person. These are good for the local businesses. These are easy to manage and operate. The definition of this entity has been given under section 4 of the Partnership Act of 1932. In simple words it is an association of two or more people to do any kind of business. All the partners in the partnership firms are working for the common objective. The registration of a partnership firm is comparatively easy and can be done with the help of the local registrar.
Limited Liability Partnership Firms
Under section 2(n) of the Limited Liability Partnership Act of 2008, definition of LLPs has been given. Such firms are the advanced version of the partnership firms. They are having all the qualities and advantages of the corporate bodies. They are also registered before the registrar of companies. The entire process of registration is online and can be completed through the Ministry of Corporate Affairs.
Process of Registration of a Partnership Firms
Follow the steps given below in order to get the registration of a partnership firm in India:
- Select a unique name for your partnership that doesn’t conflict with existing businesses.
- Draft a Partnership Deed that includes details like business name, partners’ names, contributions, profit-sharing ratio, and other terms.
- Get the Partnership Deed notarized to give it legal validity. This can be done through a local notary public.
- Apply for a PAN (Permanent Account Number) for the partnership. This can be done online through the official NSDL website.
- Open a bank account in the name of the partnership using the PAN. Submit the Partnership Deed and other required documents to the bank.
- Use the official GST portal to register for Goods and Services Tax (GST) if your company’s revenue surpasses the specified threshold.
- If the partnership will deduct TDS (Tax Deducted at Source), obtain a Tax Deduction and Collection Account Number (TAN) through the NSDL website.
- Register your partnership under the Shops and Establishment Act with the local authorities.
- Depending on the state, register for professional tax if applicable.
Registration Process of Limited Liability Partnership Firms
Follow the steps given below in order to get register your LLP in India:
- Name reservation must be done first
- Designated partners’ DSC (Digital Signature Certificate) must be obtained
- Obtain Director Identification Number (DIN)
- LLP Agreement Drafting is also important and must be draft to proceed further
- File Incorporation Form
- File LLP Agreement
- Payment of Fees is the next step
- Verification of the application by the registrar of the companies
- Certificate of Incorporation will be issued after successful verification
Why is Registration of a Partnership Firm Necessary?
As mentioned above there are two types of partnership firms in India and the registration of partnership firms for both of them are totally different. For the first type that is regular partnership firms it is not mandatory to register themselves. But it has always been suggested to them to register themselves in order to get recognized under the law. On the other hand the second type of partnership firm is LLP, it is compulsory to get registered before the registrar of companies. They cannot work without registering themselves. The main reason for the registration of a partnership firm is to be recognized.
Conclusion
Registration of a partnership in the land of India is a crucial step for those opting for the traditional partnership or the advanced Limited Liability Partnership (LLP). While the regular partnership, although not mandatory, is advised for recognition under the law, the LLP necessitates registration with the Registrar of Companies. The process of registration of a partnership involves naming the partnership, drafting a Partnership Deed, obtaining PAN, opening a bank account, and fulfilling tax obligations. For LLPs, steps include name reservation, obtaining Digital Signature Certificates and Director Identification Numbers, drafting an LLP Agreement, and filing necessary forms. The key motive behind partnership firm registration is recognition, ensuring businesses adhere to legal norms and enjoy the benefits offered by their chosen business structure.
