Document checklist, procedure and costs for setting up a partnership firm

A partnership is one of the most significant types of business organization since it allows two or more people to work together. A partnership firm is formed when two or more people join forces to start a business and distribute the earnings according to an agreed-upon formula. The term "partnership business" refers to any type of business, occupation, or professional activity. When opposed to corporations, forming a partnership is less complicated and requires less compliance.

Indian partnership firms are governed and regulated under the Indian Partnership Act, which was passed in 1932. Partners are the individuals who come together to create a partnership firm and who work together to achieve the goals of the firm. The partnership firm is established through the execution of a contract between the partners which is referred to as a partnership deed, and it governs the relationships between the partners as well as the connection between the partners and the partnership company.

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The Importance of Forming a Partnership Firm Registration

According to the Indian Partnership Act, registration of a partnership firm is entirely optional and is not required in any circumstances. It is entirely up to the choice of the couple and is entirely voluntary. The firm's registration can be completed at the time of its creation or incorporation, or it can be completed at any time during the course of the partnership's operations.

In any case, it is always desirable to register the partnership firm since a registered partnership business is entitled to certain specific rights and benefits that are not available to unregistered partnerships. The following are the advantages that a partnership firm enjoys:

• A partner may file a lawsuit against any other partner or against the partnership firm in order to enforce his or her rights deriving from a contract with the partner or against the firm. It is not possible for partners in an unregistered partnership firm to sue the firm or the other partners in order to assert his or her rights.
• The registered firm has the right to launch a lawsuit against any third party in order to enforce a contractual right. It is not possible for an unregistered corporation to launch a lawsuit against any third party in order to enforce a right. Anyone else, on the other hand, has the right to initiate a lawsuit against the unregistered company.
• A registered firm may bring a claim for set-off or other legal action in order to enforce a right arising out of a contract. In any legal action brought against it, the unregistered firm will be unable to seek set-off.

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Registration of a Partnership Firm: A Step-by-Step Guide

Step 1: Submit a Registration Application.

It is necessary to submit an application form to the Registrar of Firms of the state in where the company is located, along with the appropriate fees, in order to register the company. It is necessary for all of the partners or their representatives to sign and verify the registration application.

The following information should be included in the application, which should be sent to the Registrar of Firms via postal mail or physical delivery:

• The company's name. 
• The location where the company's primary operations are conducted.
• The location of any other locations where the company conducts business is also specified.
• The date on which each partner became a partner.
• All of the partners' names and permanent addresses are included here.
• The length of time that the company has been in operation.

Step 2: Choosing a Name for the Partnership Corporation

A partnership firm can be known by any name that they want. However, some requirements must be met while choosing a name, including the following:

• The name should not be too similar to or identical to the name of an existing company that is engaged in the same type of business.
• There should be no words in the name that refer to the emperor, crown, empress, empire, or any other words that imply endorsement or permission from the government.

Step 3:Registrar's Certificate of Registration

After reviewing the registration application and supporting documentation, the Registrar will enter the firm's information into the Register of Firms and provide the Registration Certificate to the company. Every firm is listed in the Register of Firms, which is accessible to anybody upon payment of certain fees and contains up-to-date information on all of them.

A completed application form, along with the required payments, must be sent to the Registrar of Firms in the state where the company is located. The application must be signed by all of the partners or their authorised representatives.

Documents Required for the Formation of a Partnership

The following are the documents that must be submitted to the Registrar in order for a Partnership Firm to be registered:

• Application for the formation of a limited liability partnership (Form 1)
• The Partnership Deed must be an original certified copy.
• A sample of an affidavit attesting that all of the information contained in the partnership deed and related documents is correct.
• PAN The partners' identification cards and addresses are required.
• Ownership paperwork or a rental/lease agreement demonstrating the firm's principal location of operation.
• After reviewing the documents, the registrar will enter the firm's information into the Register of Firms and give a Certificate of Registration to the firm's members.
• The Register of Firms contains up-to-date information on all firms and can be accessed by anybody after paying a fee to access the information.
• The name of the partnership firm was chosen by the partners.

Any name can be provided to a partnership firm as long as it meets the requirements provided the name should not be too close or identical to that of an existing firm engaged in the same line of business. The name should not contain words such as emperor, crown, empress, empire, or any other phrases that imply government endorsement or support.

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Deed of Partnership

A partnership deed is an agreement between the partners that specifies the rights, responsibilities, profit-sharing arrangements, and other obligations of each partner, as well as the terms of the partnership. Documented or oral agreements can be used to form a partnership deed, while it is usually better to have a written agreement in order to avoid any future issues.

In a Partnership Deed, some specifics must be included.

General:

• The firm's name and address, as well as the names and addresses of all of the partners.
• The nature of the business
• The date on which the company first opened its doors Each partner is expected to contribute a certain amount of money.
• Each partner is expected to contribute a certain amount of money.
• Profit/loss distribution among the partners is calculated as a percentage of total profits.

Specifics: 

Additionally, certain specific terms may be included in order to avoid a potential issue at a later time, such as the following:

• Interest on capital invested drawn by partners and any loans made to the firm by partners are all included in this category.
• Salaries, commissions, and any other amounts due to partners are all shown here.
• Each partner has specific rights, as well as additional rights that are only available to the active partners.
• All partners have responsibilities and obligations.
• Adjustments or procedures to be followed in the event of a partner's retirement or death, or in the event of the firm's dissolution.

Other conditions may be included at the discretion of the partners following a consensual discussion.

Creating a Checklist for Partnership Firm Registration and Drafting a Partnership Agreement

• As partners, there must be a minimum of two people.
• A maximum of twenty partners who are either equal to or less than twenty.
• Choosing an appropriate name is essential.
• The location of the company's headquarters.
• The firm's PAN card and bank account information.