PARTNERSHIP FIRM

1. Introduction

A Partnership Firm is a business structure where two or more persons come together to carry on a business and share profits. Partnerships in India are governed by the Indian Partnership Act, 1932.

Although unregistered partnerships are legal, registration is highly recommended for legal protection, smooth business operations, and effective dispute resolution.

2. Key Features of a Partnership Firm

• Formed by 2 or more persons (maximum 20)
• Governed by a Partnership Deed
• Easy to start and operate
• Moderate compliance requirements
• Profits shared as per mutual agreement
• Flexible decision-making
• No minimum capital requirement

3. Types of Partnership

1. Registered Partnership Firm

• Registered with the Registrar of Firms (ROF)
• Provides better legal rights

2. Unregistered Partnership Firm

• Legally valid but has limited rights in legal disputes

4. Advantages of Registering a Partnership Firm

• Legal recognition of the firm
• Ability to file cases against partners or third parties
• Enhances business credibility
• Easier to obtain bank loans
• Can enter contracts & open business bank account
• Minimizes chances of disputes
• Governs rights and duties clearly through a Partnership Deed

5. Partnership Deed – The Core Document

The Partnership Deed is a legal agreement between partners that defines :

• Name & address of the firm
• Names & details of partners
• Capital contribution
• Profit-sharing ratio
• Roles and responsibilities
• Admission & retirement of partners
• Dissolution rules
• Dispute resolution system
• Account & audit provisions

A deed can be registered or unregistered, but registration provides stronger protection.

6. Documents Required for Partnership Registration

A. For Partners

• Aadhaar Card
• PAN Card
• Address Proof
• Passport-size photograph

B. For Firm’s Registered Office

• Electricity Bill / Water Bill
• Rent Agreement (if rented)
• NOC from property owner

C. Other Documents

• Partnership Deed (signed & notarized)
• Application form for ROF
• Stamp duty( varies by state)

7. Registration Procedure

1. Draft a Partnership Deed.
2. Purchase stamp paper as per state requirements.
3. Partners sign the deed in the presence of witnesses.
4. Submit required documents to the Registrar of Firms (ROF):
   • Application Form
   • Partnership Deed
   • Partner KYC
   • Address proof
   • Fee receipt
5. Registrar of Firms (ROF) verifies the documents.
6. Issuance of Certificate of Registration.
7. Apply for PAN of the Partnership Firm.
8. Open a bank account in the firm’s name.

8. Post-Registration Compliance

• Maintain book of accounts
• File Income Tax Return (ITR-5) yearly
• Update ROF for changes (partners, address, firm name)
• Maintain GST registration(if applicable)
• Maintain partnership meeting records

9. Taxation of a Partnership Firm

• Partnership Firm is taxed as a separate entity
• Tax rate: 30% + cess & surcharge
• Partners’ profit share is exempt in their personal income
• Remuneration & interest paid to partners are allowed as per Section 40(b)

10. Difference Between Registered & Unregistered Firm

11. Benefits of Partnership Structure

• Simple and cost-effective
• Easy to form and manage
• No minimum capital requirement
• Ideal for small and medium businesses
• Shared expertise and responsibilities
• Flexible operational structure

12. Conclusion

Partnership Registration is a practical and cost-effective way to start a business with shared ownership. While registration is not mandatory, a registered partnership ensures legal protection, credibility,operational ease, and better dispute resolution. A well-drafted Partnership Deed and proper compliance ensure smooth and long-term business functioning.