Why to do partnership registration?
A business structure which involves 2 or more persons to manage and operate a business in order to reach their business goals with the terms of the partnership deed is said to be as a Partnership. It is very easy to register for the partnership and it is more prevalent in the unorganized sectors where it has small and medium sized businesses.
A proper firm name should be agreed before establishing a partnership deed on Partnership Registration, you must agree on a firm name and then establish a partnership deed. This document mainly states the rights and obligations that each partner has to do and all these statements were in the written format and not in the oral form. All the terms in the partnership deeds can be customized and written according to the need of partners and can even be made contrary to the Indian Partnership Act, 1932 but if the Partnership Deed is silent on any point, then the provisions of the Act would apply.
Partnership registration is needed because
- The process is very easy.
- It is inexpensive when compared to all other formats
- It has minimal compliance requirements.
- Audit is not required
What are the types of Partnership registration
Registered Partnership and unregistered Partnership, were the 2 types of Partnership. According to the terms of the Indian Partnership Act, 1932, (Act), the only criterion to commence business as a partnership is the finalization & execution of a Partnership Deed between the Partners. This particular act does not require to be registered with any of the Partnership Deed/Partnership Firm, in other terms we can say that as it is not required for the Partnership Firm to be a registered Firm.This results for the existence of many partnership businesses under the unregistered firm.
No penalties were given for the non-registration of a partnership firm, and even you can register the partnership after the formation of the firm. However, for the unregistered partnership firms there were certain rights which are denied in the Section 69 of the Partnership Act, that deals with the effects of a non-registration of a partnership firm.
Here we have pointed out some of the disadvantages of the unregistered firm:
- In any court the partner of an unregistered firm cannot any case against the other partners.
- Unless it is registered firm no suit is enforced on the right arising from an agreement
- The partners or an unregistered firm has no right to claim a set-off or other proceedings in regards with a third party at the time of dispute.
So it is better to register the partnership in order to avail benefits.
Steps involved in Partnership registration
- Under Section 58 of the Indian Partnership Act, a partnership firm can be registered at any time, even after the formation of a firm.
- Through the Registrar of Firm, the registration process is carried out.
- Once the registrar of the firm approves the documents, then a record of the entry statement is made.
- After that the partnership registration certification is issued.
Why is it needed?
- According to the Indian Partnership Act, 1932, the partner of an unregistered firm has no rights to sue the firm for enforcing any rights.
- When there is a dispute with the third party, the unregistered firm cant claim any setoff.
- The third party can sue the firm irrespective of their registration, whereas the firm cannot sue the third parties.
Documents needed for Partnership registration:
In all the registration process, it is needed to have a pan card, along with the below mentioned documents such as,
- Form No. 1 (Application for registration under Partnership Act)
- Partnership deed were all the partners has signed in
- Affidavit declaring intention to become partner
- Rental or lease agreement where the business has been set up
- Copy of Aadhaar Card/ Voter identity card
Pros and Cons of Partnership:
Pros:
- They need very minimal requirements in terms of compliance.
- A Partnership Firms either registered or an unregistered one does not require to file any annual returns.
- Financial statements of the registered/unregistered partnership firm are not publicly available.
- There is no need for the firm to be audited.
Cons of a Partnership Firm:
- Partnership firms do not have perpetual existence at will not provide any limited liability protection to its partners.
- In the Partnership firm the interest of a Partner is not transferable easily.
- The ownership structure of the ownership does not allow for investment from Venture Capitalists or Private Equity Firms.
- Funding’s from the banks or financial institutions prefer to lend it to the companies rather than a partnership organisation.
If you have any plan to register partnership business in Bangalore then please contact here.