The central concept of partnership as an act of mutual trust between the partners is in fact not codified. A Partnership is defined as an association of two or more persons who have close for Business purposes and agreed to share to profit (loss) arising out of the said Business, carried on by all or any of the Partners. Partnership Firms in India are established and Governed with the provisions of the Indian Partnership Act, 1932.
The establishment system of Partnership Firm under the Indian Partnership Act, 1932, leaves the Partnership Deed Registration with Registrar of Firm (RoF) at the desire of the Partners within the Firm. The partners of the firms can Register Partnership Firm Online bearing in mind the advantages of Registration. Allow us to first skills the Partnership Firm registration in India is going to be beneficial compared to the unregistered Partnership Firm with some legal rights.
A Partnership Firm may be a current sort of a business constitution for businesses that are owned, managed and controlled by an Association of individuals for profit. The law concerning the partnership firm is contained within the Indian Partnership Act, 1932. Partnership firms are fairly easy to start out is prevailing amongst small and medium-sized businesses within the unorganized sectors. With the introduction of indebtedness Partnerships in India, Partnership Firms are losing their occurrence thanks to the added advantages offered by an indebtedness Partnership.
A Partnership is a contract between two or more people/partners to share the profits of a business. The businesses are often carried on together by all the partners or anybody partner representing the others. A partnership is often for a hard and fast period of your time, or it’s going to be limited to a selected project, or it’s going to be dissolved at will.
The principles of the partnership were first carried under the Indian Contract Act, 1872 in Chapter XI (Section 239-266) supported the usage and customs of traders and commercial people of following English Principles of Law. With the passage of your time, Trade and Commerce developed in India, and therefore, the Indian Contract Act, 1872 with specific Sections wasn’t fulfilling all the wants.
The need for the specific Act for partnership observed. The old Act rules for partnership prepared as per the principles laid down within the Law Commission presided by Lord Romilly in 1866. The new Act is ready by following the English Partnership Act, 1890 with a number of the specified modifications as per the Indian Trade and Commerce. The regulations of the Act aren’t applicable to Jammu and Kashmir.
Concept of Registration of Partnership
A firm or company established between two or more partners with the goal of earning profit is named a Partnership Firm. It is not obligatory to register a partnership firm but there are added gains if a partnership firm is registered. A Partnership deed is a legal instrument that is made to make a partnership firm. Indian Partnership Act 1932 is the leading law which regulates the partnership firms in India.
Section 4 of The Indian Partnership Act, 1932 partnership is defined as “the relationship between persons/partners who have decided to share profits of the business carried on by all or any of them performing for all.” The Maximum number of members during a partnership is 10 for banking business and 20 for other businesses to enter into a partnership firm. It is not compulsory under Indian Law to urge a partnership firm registered, but a registered firm enjoys various benefits over a non-registered partnership firm.
Partnership firms aren’t separate legal entity but the partners are. A partnership firm can’t be a debtor or creditor and can’t own a property. The property, debit or credit of a partnership firm is really for the partners in the eyes of law. The way during which profits or losses are to be shared amongst partners must be explicitly mentioned within the partnership deed to avoid any confusion within the future. Every partner can keep it up business on behalf of others.
A partnership may be a legal relationship between two or more people that perform the business as co-owners. The partners have definite & joint liabilities and duties. The partners are both a principal also as an agent. The partners of the firm are the important owners, and therefore, the firm doesn’t have a separate legal entity. A partnership firm would be dissolved if the amount of partners reduces below two just in case of death, incapacitation or resignation of a partner.
Now a partnership is when two persons form an association to hold out a business with the motive to earn profits. They share the profits from such a business. Such an association is going to be voluntarily entered into by the partners supported an agreement between them. Such agreements between partners are often written or can even be oral.
However, it’s strongly advised for legal and practical purposes that such an agreement or contract is within the written form. And this agreement between partners to make a partnership firm is what we call a Partnership Deed.
Benefits of a Partnership Firm Registration
- Ability to file case against Third Parties:
- Higher Credibility:
- Power to file suit against co-partners:
- Conversion of Entity:
- Ability to say Set-off:
An unregistered firm is often registered at any time after its formation and establishment to say the above-explained advantages.
Provisions for Registration of Partnership
The Procedure of Partnership Firm Registration
1. Drafting of Partnership Deed: A Partnership Deed shall first be drafted considering the provisions prescribed under the Indian Partnership Act, 1932. Any clauses as needed for the Business of the proposed Partnership Firm are often incorporated within the Partnership Deed. However, the clauses to be incorporated shall be consonant with the provisions of the Partnership Act.
2. Execution of Partnership Deed: Once the draft of Partnership Deeds prepared in consultation with professionals is confirmed as per the need, the deed shall be duly executed by payment of stamp tax as applicable for the concerned State and notarization of same. The Partnership Deed shall be duly signed by all the partners of the firm at the place specified alongside the initials on all rest pages. Further, the witnesses of the Partners shall also provide the signature alongside their residential address.
3. Payment of stamp tax and Notarization: The execution of the Partnership Deed shall be done after the payment of stamp tax as prescribed under the State Stamp Act where the Business Place of the Partnership Firm is situated. The Deed is often executed either on non-judicial stamp paper or by way of franking. Franking is payment of stamp tax through banking channels and is like stamp paper. After the payment of stamp tax, the deed shall be notarized after providing the signature of Partners and witnesses as explained in point.
4. An application for PAN: The application for allotment of Permanent Account Number is often made before or after the Registration of Partnership Firm. The registration procedure of states provides an application to be made before the appliance to Register Partnership Firm Online, or otherwise. The appliance of PAN Allotment shall be supported by a copy of the Partnership Deed.
5. Registration of Partnership Deed: The authority concerned to Register To Partnership Firm is Registrar of Firms (RoF) within whose jurisdiction the place of business falls. The appliance for registration of Partnership Firm shall contain the name of the firm, name of the Partners, and their addresses, place of Business, duration or time of Business, etc. The registrar can also require submission of documents counting on the procedure as applicable within the said State.
Documents required registering a Partnership Firm
• Self-attested copy of PAN card of Partners
• Self-attested copy of Address Proof of Partners
• Utility Bill as address Proof
• Rent or lease Agreement of address (if a place is rented)
• NOC from the owner of A Business Place (if a place is rented)
• Original Partnership Deed
• Application form within the prescribed format
• Any other documents as needed by Registrar On receipt of the appliance, the Registrar shall review and grant the Certificate of Registration on his satisfaction. The Registrar shall on registration, provide the Certificate of Registration alongside the first Partnership Deed.
6. Opening of Bank Account: The requirement of the opening of a checking account arises to hold on the business activity in name only of Partnership Firm. An accounting in name only of Partnership Firm shall be opened by submitting the documents as needed by the KYC policy of your preferred bank.
The Indian Partnership Act, 1932, is the outcome of the Indian Contract Act, 1872 provisions concerned with the partnership. Because the Trade and Commerce expanded with the passage of your time there was an excellent need felt to introduce The Indian Partnership Act, 1932. The concerned Act provided all the specified legal provisions to be followed while getting into partnership but these provisions benefitted to register partnership firms only as far as violation of the terms is strictly prohibited.
Amendment of Register by Order of Court (Section-65)
Sometimes as a consequence of a choice concerning a registered firm, the necessity for amendment within the entry within the Register of Firms may arise. In such a case, the Court deciding any matter concerning a registered firm has been empowered by s 65 to direct the Registrar to form any amendment within the entry of the Register of Firms as may become necessary as a consequence of the choice.
Information given to the Registrar through various documents filed with him in reference to the registration of a firm serves the aim of creating the third parties conversant with the firm, and therefore, the partners in order that third parties handling the firm aren’t misled. Correct and complete information should be available with the Registrar. Section 70 imposes a penalty for creating any false declaration in any document filed with the Registrar.
Penalty for Furnishing False Particulars (Section-70)
A person who signs any statement, amending statement, notice or intimation under this Chapter containing any particular which he knows to be false or doesn’t believe to be true or containing particulars which he knows to be incomplete or doesn’t believe to be complete, shall be punishable with imprisonment which can reach three months, or with a fine or with both.
In M/s Jammu Cold Storage V. M/s Khairati Lal and Sons, M/s Khairati Lal and Sons instituted a suit to recover a sum of Rs. 1000/- from m/s Cold Storage and General Mills Ltd on 15th April, 1959. The firm wasn’t registered thereon day, but it had been got registered subsequently on 30th May 1959. It had been held by the J & K Supreme Court that since the firm wasn’t registered on the date of the institution of the suit, the suit cannot proceed further, and it must be dismissed.
In Navinchandra V. Moolchand, it’s been held that even a suit for damages for misconduct brought by one partner against another after the dissolution of an unregistered firm would be permitted because the quantity so realised should be divided between the partners which are, therefore, the property of the dissolved firm.
Indian Partnership Act plays an important role in the governing partnership firms and their smooth functioning. The partnership is one of the foremost important sorts of business, and its easy formation as laid by the laws under the Partnership Act helps people form a partnership firm with any hindrance and conduct business for his or her living.
To get rid of the deficiency of unregistered Partnership Firm, the Partnership Act provides that the said unregistered Partnership Firm is often registered at any time after its establishment by making an application for Registration. However, the appliance for registration can’t be made to say the benefits of a registered firm when the third party has already initiated the suit against the Partnership Firm. More and more encouragement should be made to partnership firms for registration, and also the partners should know their rights and duties.
Question 1 – What are the benefits of Registration of partnership?
Answer: Ability to file a case against Third Parties, Higher Credibility, Power to file suit against co-partners, Conversion of Entity, Ability to say Set-off.
Question 2 – What is the Procedure of Partnership Firm Registration?
Answer: Drafting of Partnership Deed, Execution of Partnership Deed, Payment of stamp tax and Notarisation, An application for PAN, Registration of Partnership Deed, Opening of Bank Account.
Question 3 – What is the scope of liability when it comes to partnerships?
Answer: Every partner is jointly liable with all the opposite partners, and also individually, for all acts/activities of the firm, during the course of business while he/she may be a partner. This suggests that if a loss or injury is caused to any third party or a penalty is levied during the course of business, all partners are going to be held liable albeit the injury or loss was caused by one among the partners.
Question 4 – Is it compulsory to register a partnership firm?
Answer: No but if the firm is registered partners can claim for the rights.
Question 5 – Can we file a suit against the partner if any of them violated the rules? If Yes, Which law governs it?
Answer: Yes, the Indian Partnership Act 1932 governs the partnership firms in India.