Partnership Firm Registration
A partnership is a type of business entity that is brought into existence by virtue of an agreement known as a Partnership Deed. In essence, a Deed is an agreement between the Partners on the entire business of the partnership. In India, a partnership business is governed by the Indian Partnership Firm Registration Act, 1932.
In India, anyone can form a Partnership Firm either by drafting a partnership deed/agreement in writing or just by Oral Agreement. Hence, as per law, it is not mandatory to have a Written Partnership Deed. Even registration is not mandatory. But Partnership Firm Registration is in order to avoid any conflict between the partners in the future, it is highly recommended to have a written agreement and get it registered.
Indian Partnership Act 1932 is that the governing law which regulates the partnership firms in India. As per the act “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting 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. Will get more information Regarding Partnership Firm Registration in this.
Rights and Duties of Partners
Rights of partners
- participate within the conduct of business: each partner has a right to participate in the conduct of the business.
- access and inspect books and accounts: Each partner has a right to access and inspect the book of account of the firm.
- be indemnified: have a right to be indemnified for the decision taken in the course of the business.
- precise his opinion: have the right to participate in the decision-making process.
- urge interested on capital or advances: when they agree to give interest, then such interest would be paid from the capital.
- share profit and loss: partnership deed prescribing the ratio of profit and losses it will be shared in accordance with the partnership deed.
Duties of Partners
- act in good faith: The partners must act in good faith for the greater common advantage. The partner has to work for more profit for the company.
- Render true accounts: The partners are committed to disclosing and providing complete information about matters affecting the organization to any partner or his or her legal representatives.
- Indemnify for fraud: If there is any loss in the business of the company due to the action of the partner, he must pay compensation to his partner for such loss.
- not to compete: This act states that if a partner makes a profit by participating in an equivalent or competing business with the company, the partner must account such profits.
- be Diligent: A partner must be diligent in his duties. For mere errors of judgment or acts done in good faith, a partner cannot be made liable.
- properly use the property of the firm: This act states that the property of the company should be owned and used by the company only for the business of the company.
- account for personal profits: If a partner uses the company’s property and makes a profit from it, he must account for the property. This duty arises due to the fiduciary relationship between the partners.
Partnership Deed Consists of the Following Details:
- Name and address of its firm and business
- Name and address of its partner
- Rights, duties and obligation of partners
- Capital contributed by each partner
- Mode of settlement on disputes among partner.
- Profit and loss sharing ratio
- Rate of interest on capital, loan, drawings etc.
- Settlement of accounts on the dissolution of the firm
- Rules to be followed just in case of admission, retirement and death of a partner
- Any other affecting the rights of the partners
- Salaries, commission payable to partners
Advantages of Partnership Firm Registration
- Minimum Compliance
- Simple to Begin
- Sharing of Risk
- Comparatively Economical
- No Annual Returns
- No Statuary Audit
Documents Required for Partnership Firm Registration
- Form No. 1 (Application for registration under Partnership Act)
- Original copy of Partnership Deed, signed by all partners
- Affidavit declaring intention to become partner
- Rental or lease agreement of the property/campus on which the business is set
- GST Registration
- Current Bank Account
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