Partnership is defined as association of two or more persons who have come together for Business purpose and agreed to share 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 by the provisions of Indian Partnership Act, 1932 (referred as “Act”). The establishment procedure of Partnership Firm under Indian Partnership Act, 1932 leaves the Partnership Deed Registration with Registrar of Firm (RoF) at the will of the Partners in the Firm.
The partners of the firms may Register Partnership Firm Online considering the benefits of Registration. Let us first know how the Partnership Firm registration in India will be beneficial compared to unregistered Partnership Firm.
Benefits of Partnership Firm Registration:
- Ability to file case against Third Parties:
The partners of the registered Partnership Firm can bring third parties to the court for resolution of disputes arouse during the course of Business or any other matter relating to the Partnership Firm.
An unregistered Partnership firm loses the right file the case against third party for resolution of their disputes until and unless the procedure of Deed Registration has been completed. However, the third party always own the right to file the suit against a Partnership Firm irrespective of its registration status.
- Power to file suit against co-partners:
As none knows when the dispute between the Partners arises, whether for the sharing of profits or any other matter regarding operations of the Partnership Firm. The resolution of any dispute is best resolved by the Court of Law.
The Partners of an unregistered Partnership Firm cannot enforce any clauses of Partnership Deed. To enforce the said clauses, the registration for Partnership Firm shall be required by following the procedure prescribed for the same.
- Ability to claim Set-off:
The registration of Partnership Firm enables the partners with power to claim set-off. When any third party files a suit against the Partnership Firm, the Partnership Firm can claim the set-off, if any against the claim of third Party. The said power to claim set-off is not available when the Partnership Firm is not yet registered under the Indian Partnership Act, 1932.
- Higher Credibility:
Compared to an unregistered Partnership Firm, a Partnership Firm which has completed the procedure of Online Registration of Partnership Firm enjoys higher credibility. Although both registered and unregistered Partnership Firms are legal and valid under the given Act, the Registered Firm is highly preferred by authorities over unregistered one.
- Conversion of Entity:
A Partnership Firm as registered with the Registrar of Firm has ease compared to an unregistered firm for conversion. The conversion of the Partnership Firm into any other entity such as Private Company or LLP i.e. in corporate structure can be easily completed.
An unregistered firm can be registered at any time after its formation and establishment to claim above explained advantages.
Procedure of Partnership Firm Registration:
A Partnership Firm is registered under local Registrar of Firm (RoF) hence the procedure of registration may differ from State to State. Hereby, we are discussing a general procedure to be followed to register Partnership Firm online.
- Drafting of Partnership Deed:
A Partnership Deed shall first be drafted considering the provisions prescribed under the Indian Partnership Act, 1932. Any clauses as required for the Business of the proposed Partnership Firm can be incorporated in the Partnership Deed. However, the clauses to be incorporated shall be in harmony with the provisions of Partnership Act.
- Execution of Partnership Deed:
Once the draft of Partnership Deed prepared in consultation with professionals is confirmed as per the requirement, the deed shall be duly executed by payment of stamp duty as applicable for the concerned State and notarisation of same. The Partnership Deed shall be duly signed by all the partners of the firm at the place specified along with the initials on all rest pages. Further, the witnesses of the Partners shall also provide the signature along with their residential address.
- Payment of Stamp Duty and Notarisation:
The execution of the Partnership Deed shall be done after the payment of stamp duty as prescribed under State Stamp Act where the Business Place of the Partnership Firm is situated. The Deed can be executed either on non-judicial stamp paper or by way of franking. Franking is payment of stamp duty through banking channels and is equivalent to stamp paper. After payment of stamp duty, the deed shall be notarised after providing signature of Partners and witnesses as explained in previous point.
- Application for PAN:
The application for allotment of Permanent Account Number can be made before or after the Registration of Partnership Firm. The registration procedure of most states provides application to be made before the application to Register Partnership Firm Online or otherwise. The application of PAN Allotment shall be supported by copy of the Partnership Deed.
- Registration of Partnership Deed:
The authority concerned to Register Partnership Firm is Registrar of Firms (RoF) within whose jurisdiction the place of business falls. The application 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 may also require submission of documents depending on the procedure as applicable in the said State.
Documents required to register a Partnership Firm:
- Self-attested copy of PAN card of Partners
- Self-attested copy of Address Proof of Partners
- Utility Bill as Business Address Proof
- Rent or lease Agreement of Business Address (if place is rented)
- NOC from the owner of Business Place (if place is rented)
- Original Partnership Deed
- Application form in the prescribed format
- Any other documents as required by Registrar
On receipt of the application, the Registrar shall review and grant the Certificate of Registration on his satisfaction. The Registrar shall on registration, provide the Certificate of Registration along with the original Partnership Deed.
- Opening of Bank Account:
The requirement of opening of Bank Account arises in order to carry on the commercial activity in name of Partnership Firm. A current account in name of Partnership Firm shall be opened by submitting the documents as required by the KYC policy of your preferred bank.
In order to remove the deficiency of unregistered Partnership Firm, the Partnership Act provides that the said unregistered Partnership Firm can be registered at any time after its establishment make an application for Registration. However, the application for registration cannot be made to claim benefits of registered firm when the third party has already initiated the suit against the Partnership Firm.