Important steps for partnership registration?

Partnership registration starts with the preparation of a partnership deed and following other steps to register the firm, in this article, we have given the sequential process for partnership registration in Chennai. Briefly, there are three parts to partnership firm setup and registration, it starts with the preparation of the partnership deed, partnership firm registration with the registrar of the firm, and application for PAN and TAN number. 

What is a partnership deed?

A partnership deed is a legal document drafted as per the Partnership Act 1932, it is the primary document that contains terms of partnership business, nature of business, profit sharing ratios, etc.

While drafting a partnership deed the provisions of the Income Tax Act 1961 regarding remuneration to partners, and interest should be considered.

For drafting a partnership deed, a minimum of two partners is required, all the partners should be Indian citizens and should have attained the age of 18 as of the date of admission to the partnership firm.

Each paragraph in the partnership deed is called a clause, each clause defines the specific rules and other important aspects of the partnership firm.

How to prepare a partnership deed?

Each clause in the partnership deed is important as it is legally binding on all the partners, I had listed out important clauses and basic information on how it should be drafted.

• Date of commencement of partnership business – The date of commencement of partnership business is the date from which the firm becomes legally set up by the partners. This date should be properly considered in case of person aged exactly 18 is admitted in tot the partnership firm, the stamp paper date should be before this date.
• List of partners – Name of partners with information such as name of father, age, and address as per Aadhaar card shall be included, it is advisable to avoid the initials of the partner to comply with legal documentation guidelines.
• Profit sharing ratios and investment – Generally profits are losses are shared in the same ratios and there will be a specific clause mentioning this fact. In most cases, the profit sharing ratio and investment ratio of each partner will not be the same, because some partners may only invest, and some partners will invest as well as take part actively in the business of the partnership firm.
• The registered address of the firm – Registered address is an important clause in the partnership deed, in a practical business environment most businesses require GST registration, therefore it is recommended to follow the guidelines for GST registration in this regard.
• Nature of business – This is the important area where you can find the difference if the deed is drafted by the partnership registration consultant. In case the deed is prepared by a partnership registration expert, he will consider adding descriptive objects that will be easy for the users of the deed.
• Name of the partnership firm –  There are no strict guidelines for the name of the partnership firm, mostly all the names that denote legal objects will be approved by the registrar, it will be better to use a unique name for your partnership business where the business name itself will be used as brand.
• Mode of operation of bank accounts – In case where there is a minimum no of partners it is recommended that the mode of operation shall be given to all partners collectively, in that case, words such as “cheques and other bank documents shall be signed by all the partners” will be added. In other cases, the name of the partner or the words such as “shall be signed by any one of the partners” shall be added.
• The interest rate for capital and additional capital – This clause is added to give effect to provisions of the Income Tax Act regarding the allowability of interest expenses paid to the partner. In case there is no interest clause in the partnership deed, then interest expenses will be disallowed by the income tax department.
• Mode of admission of partner and retirement of partner – This clause contains the manner of giving notice to the firm by the retiring partner, how and when a new partner can be admitted to the partnership firm.
• Duration of the partnership firm – Generally the duration of the partnership will not be fixed at the time of starting the partnership business, if the duration of the firm is fixed then the firm will cease to exist the day after the mentioned date. The words “At Will” are added in this clause to mean that the firm may be dissolved at the will of the partners.

Once the partnership deed is drafted with all the important legal requirements, it is executed on stamp paper of Rs.300 for partnership registration in Chennai and is to be signed by all the partners and two witnesses.

How to apply for partnership registration in Chennai?

As per the Indian Partnership Act 1932 registration of a partnership firm is not mandatory, the partnership firm comes into existence once the partnership deed is drafted and signed by all partners and witnesses.

Partnership Act 1932 does not require partnership firms to be registered, however for bank account opening, transacting with third parties, government tenders, and application for a bank loan require registration of a partnership firm.

The partnership registration process with the government is initiated by submitting an online partnership firm registration application with the registrar of firms of the respective jurisdiction, for partnership registration in Chennai.

There are four registrars of firms in the Chennai zone namely, Chennai South, Chennai North Zone, and Chennai Central Zone, Chennai Outer Tambaram Zone, you can also submit with the support of a partnership registration consultant in Chennai.

Documents required for partnership registration?

• Signed Partnership deed
• Aadhaar card of all partners
• Firm registration application form
• Registered E-mail ID and mobile no of the firm.
• Personal E-Mail ID and mobile no of all partners.

Partnership registration is applied online and acknowledgment with prescribed documents is submitted to the registrar of the firms for approval on payment of government fees. The application will be approved after the verification by the registrar of firms and a digitally signed acknowledgment for registration of firms will be issued by the registrar in FORM-C. 

This form C is generally called a partnership firm registration certificate, and it is to be kept valid by filing the annual return for the partnership firm.

Application of PAN number for partnership firm

A partnership firm is a distinct person, so the PAN number application is mandatory once the partnership deed is executed, the PAN number application can be made by submitting FORM 49A along with the partnership deed.

The pan number allotted is the basic tax identification number used for income tax return filing for partnership firms, GST registration for partnership firms, and other tax and legal registration or compliances required.

Application of TAN number for partnership firm

TDS provisions are applicable without any threshold limits on turnover of business, therefore is recommended to apply the TAN number for TDS deduction once the partnership deed is drafted and signed. As a standard operation process, we always apply the TAN number along with the PAN number application.

All the mandatory processes required are discussed already, we advise approaching tax consultants to know more about GST registration requirements and other income tax compliances.