AMM & ASSOCIATES

CHARTERED ACCOUNTANTS

Madan Mohan Arora

Chartered Accountant

Madhu Arora

Company Secretary

AMM & ASSOCIATES

CHARTERED ACCOUNTANTS

Partnership Company Registration

    Introduction to Partnership Company Registration

    The partnership company business structure, known for its simplicity and ease of formation, is a popular choice. According to the Indian Partnership Act of 1932, a partnership firm is formed when two or more individuals agree to share the profits and responsibilities of a business.

    Registering a partnership company not only grants legal recognition and strengthens credibility but also ensures the protection of partners’ rights. While not mandatory, registration offers key advantages such as legal security and simplified dispute resolution.

    Key Features of a Partnership Company

    • Minimum Two Partners: At least two individuals are required to start a partnership firm.
    • Unlimited Liability: Partners share the business’s liabilities and obligations.
    • Mutual Agreement: Governed by a Partnership Deed, which defines roles, responsibilities, and profit-sharing.
    • No Minimum Capital Requirement: The investment amount is decided mutually by partners.
    • Simplified Compliance: Fewer legal formalities compared to private limited companies.
    • Taxation Benefits: Partnership firms are taxed under the Income Tax Act 1961, with profits distributed among partners.

    Types of Partnership Firms in India

    Partnership firms can be categorized into two types based on their registration status:

    1. Registered Partnership Firm

    • Legally recognized under the Partnership Act 1932.
    • Eligible to sue and be sued in a court of law.
    • Partners have excellent legal protection.
    • Ensures smooth resolution of disputes and conflicts.

    2. Unregistered Partnership Firm

    • Formed through a mutual agreement between partners.
    • Not legally recognized, making dispute resolution difficult.
    • Cannot file legal suits against third parties.
    • May face challenges in business expansion and obtaining loans.
    While an unregistered partnership firm can operate without legal formalities, registering the firm provides several advantages.

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    Steps for Partnership Company Registration in Delhi, India

    Step 1: Selection of Business Name

    The partners must choose a unique name for the partnership firm. The name should:

    • Not be identical to an existing registered business.
    • Not violate trademarks or copyrights.
    • Comply with legal and ethical guidelines.

    Step 2: Drafting the Partnership Deed

    A Partnership Deed is a legally binding document outlining the terms of the partnership. It should include:

    • Firm Name & Address
    • Details of Partners (Names, Addresses, Age, etc.)
    • Capital Contribution by Each Partner
    • Profit & Loss Sharing Ratio
    • Rights, Responsibilities, and Liabilities of Partners
    • Procedure for Adding or Removing Partners
    • Dispute Resolution Mechanism
    • Dissolution Terms

    The deed must be printed on stamp paper and signed by all partners.

    Step 3: Notarization of the Partnership Deed

    • To enhance legal validity, the deed must be:
    • Signed by all partners in the presence of a notary.
    • Witnessed by two individuals.

    Step 4: Application for Registration

    The firm must submit a registration application to the Registrar of Firms in the respective state. The application should include:

    •  Duly filled out Form 1 (Application for Registration).
    •  Attested copy of the Partnership Deed.
    •  Proof of Business Address (Utility Bill, Rent Agreement, etc.).
    •  PAN Cards and Aadhar Cards of all partners.

    Step 5: Payment of Registration Fees

    The registration fee varies across states and must be paid upon application submission.

    Step 6: Verification and Approval

    The Registrar of Firms, a government-appointed authority, reviews the application and documents. Upon successful verification, the firm receives a Certificate of Registration.

    Documents Required for Partnership Company Registration

    • PAN Cards of All Partners
    • Aadhar Card/Voter ID/Passport (Identity Proof)
    • Address Proof of Partners (Utility Bill, Bank Statement, etc.)
    • Passport-Size Photographs
    • Rental Agreement (if operating from a rented premise)
    • Partnership Deed (Duly Stamped and Notarized)

    Advantages of Registering a Partnership Firm

    • Legal Recognition: Provides legal identity, enabling the firm to enter contracts and agreements.
    • Ease of Business Operations: Simplifies banking transactions and property acquisitions.
    • Dispute Resolution: Partners can legally settle disputes.
    • Business Credibility: Enhances customer, supplier, and financial institution trust.
    • Access to Loans & Government Benefits: Registered firms can avail of bank loans and government schemes.

    Disadvantages of a Partnership Firm

    • Unlimited Liability: Partners are personally liable for business debts.
    • Limited Growth Potential: Raising capital is difficult compared to private limited companies.
    • Risk of Disputes: Mismanagement or conflicts among partners can affect business continuity.
    • Dissolution Challenges: The exit of a partner may lead to firm dissolution.

    Taxation of Partnership Firms in India

    • Partnership firms are taxed at a flat rate of 30% on profits, plus surcharge and cess.
    • Partners’ income from the firm is exempt from tax if received as a profit share.
    • Firms can claim deductions on business expenses, depreciation, rent, and salaries paid to partners.

    Difference Between Partnership & Other Business Entities

    Feature Partnership Firm LLP (Limited Liability Partnership) Private Limited Company
    Legal Status
    Not a separate legal entity
    Separate legal entity
    Separate legal entity
    Liability
    Unlimited
    Limited to investment
    Limited to shares owned
    Compliance
    Minimal
    Moderate
    High
    Registration
    Optional
    Mandatory
    Mandatory
    Taxation
    Flat 30%
    30%
    25% (for small companies)
    Profit Sharing
    As per agreement
    As per LLP deed
    Dividend distribution
    Investment Scope
    Limited
    Higher than Partnership
    Higher, can raise equity capital

    A Partnership Company is a simple and effective way to start a business with shared responsibilities. While registration is not mandatory, it offers legal protection, credibility, and financial benefits. Entrepreneurs looking for a low-cost business structure with flexibility in decision-making can consider forming a registered partnership firm.

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    • marora_mail@yahoo.com
    • A-100 Ground Floor & Basement, C R Park, New Delhi-110019, India
    • 5/32 Vikram Vihar, Lajpat Nagar IV, New Delhi - 110024

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