Partnership firm registration is a good form of business structure when more than one person intends to start a business. The rules relating to sharing of profits, partners’ duties, and responsibilities of each partner are governed by the Partnership Act 1932. The rights of each partner relationship between partners and firm and the third party are clearly specified in the Partnership Act 1932.
How a partnership firm is formed?
A partnership firm is formed by a minimum of 2 partners with a partnership deed. Details regarding the name of the business, address of the business, nature of the business, profit sharing ratio, rules regarding retirement and admission of a new partner, bank account operation, etc, will be included in the partnership deed. It is the documents that give legal rights and responsibilities to partners and third parties. Partnership firm registration in Chennai is an economical option compared to LLP registration or private limited company registration
How to register a partnership firm in Chennai?
Partnership company registration practically starts from the drafting of the partnership deed, our partnership deed drafting service provides exhaustive inclusion of every activity relating to your nature of business, once the partnership deed is drafted and signed by all partners partnership firm comes into existence. Registration of partnership is done with the registrar of firms, the registration and approval process is quite easy and with requires only minimal documentation. Partnership business registration is generally suitable for businesses with fewer legal complications
Documents required for partnership registration
- Pan card of all partners
- Aadhaar card of all partners
- Filled up partnership firm registration application or alternatively, you can provide details given below
- Name and address of Business
- Profit sharing ratio
- Nature of business
- Mobile no and e-mail ID of partnership firm
- Mobile no and e-mail ID of all partners
Steps to Register
Consultation and Advisory
Deed approval and application form signing
Pan card application filing
Important compliance after partnership registration
- A partnership firm is recognized as a separate person in view of the Income tax act, income tax filing for a partnership firm is mandatory even if there are no business activities or financial transactions.
- Partnership firms should file partnership firm annual return each year with the registrar of the firm within the due date
- At any point in time there should be a minimum of two partners in the firm, in case of a firm having only two partners care should be given to maintain this limit in case of the resignation of any one partner it is recommended to bring a third partner first and then proceed to the resignation of the existing partner.
- TDS provisions are applicable without any turnover limit, it is applicable even if tax audit is not applicable to the firm
- It is recommended to operate a bank account only with the authorization of all partners, this will help to avoid unnecessary financial disputes between partners.
- If there is any change required in the name of the partnership firm, nature of business, change in profit sharing ratio, change of address of partnership firm, partnership admission, or retirement of partner should be done only through the partnership amendment deed.
- All active partners have equal rights in the business activities of the firm irrespective of their profit-sharing ratio and investment as per Indian Partnership Act 1932
- Income tax is charged at a flat rate in the case of a partnership firm, so it is advisable to draw salaries for partners and collect interest on capital from the firm for tax saving advantage in the hands of the individual partners. Salary paid to partner from partnership firm is deductible as expenses subject to limits mentioned in the Income tax act
Important registrations required for partnership
TDS deduction is compulsory for partnership firms as there is no relaxation in terms of turnover limit, unlike proprietorship firms. So it is advisable to apply for a TAN number after the formation of a partnership along with PAN.
MSME registration is required in case the firm goes for a business loan, bank overdraft, or another financial arrangement. It is also one of the requirements for business units located in industrial estates, dedicated industrial areas, etc. Various capital subsidies and other subsidies based on the entrepreneur profile can be applied only when Udyam registration with the Ministry of Micro, medium, and small enterprises are registered.
Partnership firms need to apply for GST registration in case of interstate sales. Import and export and other specified business. Where a partnership business is started for a franchisee there is no threshold limit applicable for GST registration turnover crosses the threshold limit, or the firm sells goods to other states or carries import-export operations.
FSSAI – Food safety license registration
FSSAI registration is mandatory for all food business operators irrespective of their level of turnover, the type of food safety application and category of food business varies for each business.
From Auditor DESKIt is recommended to register a partnership firm with the registrar of firms even though it is not mandatory, it will cost more if we apply for partnership registration at a later stage due to late filing penalties, etc.
Frequently Asked Questions
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Precautions and procedures required for successful partnership business
- A partnership form of business is the type of business structure that is more flexible in terms of rules and regulations, it is advisable to put everything in a partnership deed or partnership amendment deed to make the relationship between partners convincing
- Make collective decisions on important aspects like major orders, major clients, major expenses, changes of business strategy, expansion, etc, never implement majority rule in your partnership every partner’s consent is important for getting maximum benefits from a partnership business
- Admission of new partners should be done only for the benefit of the firm
- In the case of capital-intensive business, it is important that all partners should be financially sound for capital investment and further proceedings.
- In the case of the service sector we recommend to all partners should be either experienced or all partners should without any experience, balanced experience will give a good understanding between partners and results will be good when business is done by like-minded people.