Formation of partnership deed & firm

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PARTENERSHIP

WHAT IS PARTNERSHIP?

“A type of business organization in which two or more individuals pool money, skills, and other resources, and

share profit and loss in accordance with terms of the partnership agreement. In absence of such agreement, a partnership is assumed to exit where the participants in

an enterprise agree to share the associated risks and rewards proportionately.

FORMATION OF PARTNERSHIP DEED OR FIRM?

“IN THE PARTNERSHIP ACT 1932 THERE ARE NO SECTION RELATED FOR

COMPULSORY REGISTRATION FOR PARTNERSHIP DEED OR FIRM BUT NON-

REGISTRATION RESTRICTS THE PARTNERS OR THE FIRM FROM TAKING

ANY LEGAL ACTION.

PARTNERSHIP DEED & FIRM

NON- REGISTRATED PARTNERSHIP AGREEMENT & FIRM

REGISTRATED PARTNERSHIP AGREEMENT & FIRM

EFFECT OF NON- REGISTRATION OF PARTNERSHIP AGREEMENT &

FIRM

1. No suit by a partner against other partners or firm.2. No suit against any third party or firm. 3. The partner never claim of set-off or other

proceedings based upon on contract.

EFFECT OF REGISTRATION OF PARTNERSHIP AGREEMENT &

FIRM

1. Power to file case in the court by a partner against to the other partners or firm.

2. Power to file case in the court by a partner or firm against to the third party or firm.

3. Power to claim set-off.

APPLICATION FORM OF PARETNERSHIP DEED

PARTNERSHIP DEED

PARTNERSHIP FIRMAs you know that according to the partnership act 1932 “REGISTRATION OF THE FIRM IS NOT COMPULSORY,BUT NON-REGISTRATION RESTRICTS THE PARTNERS OR THE FIRM FROM TAKING ANY LEGAL ACTION”

Procedure to create Partnership Deed & Register a Partnership Firm

1. Choosing a Partnership Firm NameThe partners are free to choose any name as they desire for their partnership firm subject to the following rules:-

◉ The names must not be too identical or similar to the name of another existing firm doing similar business so as to lead to confusion. The reason for this rule being that the reputation or goodwill of a firm may be injured, if a new firm could adopt an allied name.

◉ The name must not contain words like Crown, Emperor, Empress, Empire or words expressing or implying the sanction, approval or patronage of Govt except when the State Govt signifies its consent in writing to the use of such words as part of the firm name [Section 58(3)]

2.How to create a Partnership Deed?

The document in which the respective rights and obligations of the members of a partnership is written is called the Partnership Deed.

A partnership deed agreement may be written or oral. However, practically oral agreement does not have any value for tax purposes and therefore the partnership agreement should be written. The following are the essential characteristics of a partnership deed:-

• Name and Address of the firm as well as all the partners• Nature of business to be carried on• Date of Commencement of business• Duration of Partnership (whether for a fixed period/project)• Capital contribution by each partner• Profit sharing ratio among the partners

The above are the minimum essentials which are required in all partnership deeds. The partners may also mention any additional clauses. Some of the examples of additional clauses which may be mentioned in the partnership deed are mentioned below:-

• Interest on Partner’s Capital, Partners’ Loan, and Interest, if any, to be charged on drawings.• Salaries, Commissions etc, if any, payable to partners• Method of preparing accounts and arrangement for audit• Division of task and responsibility i.e. the duties, powers and obligations of all the partners.• Rules to be followed in case of retirement, death and admission of a partner.• The Partnership Deed created by the partners should be on a stamp paper in accordance with

the Indian Stamp Act and each partner should have a copy of the partnership deed. A Copy of the Partnership Deed should also be filed with the Registrar of Firms in case the firm is being registered.

How to register a Partnership Firm in India

Partnerships in India are governed by the Indian Partnership Act, 1932. As per the Partnership Act, Registration of Partnership Firms is optional and is entirely at the discretion of the partners. The Partners may or may not register their Partnership Agreement.

However, in case the partnership deed is not registered, they may not be able to enjoy the benefits which a registered partnership firm enjoys.

Registration of Partnership Firm may be done before starting the business or anytime during the continuance of partnership. However, where the firm intends to file a case in the court to enforce rights arising from the contract, the registration should be done before filing the case .

The procedure for Registration of Partnership Firms in India is fairly simple. An application and the prescribed fees are required to be submitted to the Registrar of Firms of the

State in which the firm is situated. The following documents are also required to be

submitted along with the application:- 👆

1. Application for Registration of Partnership in Form No. 1

2. Duly filled specimen of Affidavit

3. Certified True Copy of the Partnership Deed 👉

4. Ownership proof of the principal place of business or rental/lease agreement thereof 👉

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The application or statement must be signed by all the partners, or by their agents especially authorised in this

behalf. When the registrar is satisfied with the points stated in the partnership deed, he shall record an entry of

the statement in a register called the Register of Firms and issue a Certificate of Registration (Sec 59).

The Register of Firms maintained at the office of the Registrar contains complete and up-to-date information

about each registered firm. This Register of Firms is open to inspection by any person on payment of the prescribed

fees (Sec 66).

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It should however be noted that registration with the Registrar of Firms is different from Registration with the Income Tax Deptt. It is

mandatory for all firms to apply for Registration with the Income Tax Department

and have a PAN Card.After obtaining a PAN Card, the Partnership Firm would be required to open a Current

Account in the name of the Partnership Firm and operate all its operations through this

Bank Account.

THANKS!