Partnership Firm

A partnership firm is a business enterprise formed by individuals who have mutually agreed to share the profits or losses of the said business. A partnership is a very good choice of business entity for small businesses, in which two or more individuals have decided to work in a business. Partnerships are very popular in India because of its ease of formation and minimal regulatory compliances.The concept of LLP was only introduced in 2010, whereas the Partnership Act, 1932 has been in existence before India got independence.

DIFFERENT TYPES OF PARTNERSHIP
There are predominantly two types of Partnership in India 2022. They are either Registered or Unregistered Partnerships. As per the terms of the Indian Partnership Act, 1932, (Act), the only requirement to commence business as a partnership is the finalisation and execution of a Partnership deed between the said partners. The Indian Partnership Act has no mandatory requirement for a Partnership Deed/Partnership Firm to be a registered firm. Lots of firms in India exist as unregistered firms. There are no penalties levied for non-registration of a partnership firm. A partnership firm can register even after its formation. However, unregistered partnership firms have certain rights denied to them in Section 69 of the Partnership Act, which deals with the effects of non-registration of a partnership firm. Some of the disadvantages of an unregistered firm are mentioned below:

A partner of an unregistered firm can’t file a lawsuit in any court against the partnership firm/ or against the other partners, for the enforcement of any right that arises, from a contract or right which is conferred by the Partnership Act

There can be no lawsuit filed to enforce a right arising from an agreement in any Court by or on behalf of a firm against any third party unless the partnership firm is registered
An unregistered partnership firm or any of its partners cannot claim any form of set-off or other proceedings in a legal dispute with a third party

DIFFERENCES BETWEEN LLP & PARTNERSHIP

The cost of registration for a LLP firm is higher than the cost for registration of a partnership firm
A LLP firm is registered in India under the Ministry of Corporate Affairs, Central Government. A partnership firm is registered with the Registrar of Firms which is managed by the respective state government in which the firm is registered
The main benefit of a Limited Liability Partnership over a partnership firm is in an LLP, one partner is not responsible for another partner’s misconduct. An LLP gives limited liability protection to the owners from the debts of the said LLP. However, unlike a private limited company shareholder, the partners of an LLP have the right to manage their company
A LLPs and Partnership firm must have a minimum of two partners to be registered. Post the incorporation of an LLP it can have unlimited partners. In the case of a Partnership firm, if the number of partners goes below the compulsory numder of 2 due to death, incapacitation or resignation of a partner, the partnership firm will be dissolved. Whereas in an LLP if the number of partners goes below 2, the sole partner can get a new partner to fill the vacant position without dissoving the LLP

REGISTRATION OF PARTNERSHIP FIRM IN INDIA 2022
A partnership firm in india has to be registered under Section 58 of the Indian Partnership Act at any time. This can be done even before formation. The registration of a partnership firm is done through the Registrar of Firms where the partnership firm in india is situated. When the Registrar of Firms is satisfied that the provisions of Section 58 have been complied with, a record of the entry of the statement is made in the Register of Firms. After this the certificate of partnership registration is issued.

DOCUMENTS REQUIRED FOR REGISTRATION OF PARTNERSHIP FIRM
The application for registration of Partnership Firm must contain the following documents:

· The prescribed registration form for incorporating a company/organization

· The identity and address proof of partners

· A certified true copy of the Partnership deed

· The proof of the principal place of business.

As identity and address proof of partners, any of the below mentioned documents must be submitted:

The PAN Card copy
Copy of the Passport
Copy of the Driver’s License
Copy of the Aadhar Card
Copy of the Voters ID
The sale deed if any of the partners owns the place where the business operates from
The rental agreement copy if the business premises are rented
The copy of latest electricity bill or water bill or property tax receipt

ADVANTAGES OF A PARTNERSHIP FIRM
There are very minimal needs in terms of compliance. In the case of a Company or LLP the annual filing of its financial statements has to be done with the Registrar of Companies. These documents are then available in the public domain. Whereas for registered/unregistered partnership Firms it is not mandatory to file any annual returns. Also, the financial statements of a partnership firm 2022 are not available publicly and it is not mandatory for a registered & unregistered partnership firm to be audited. Whereas, the accounts of a LLP have to be audited by a practicing Chartered Accountant, when the turnover is in the excess of INR 40 lakhs per annum or when the capital contribution exceeds INR 25 lakhs.

DISADVANTAGES OF A PARTNERSHIP FIRM
A partnership firm does not give the partners limited liability protection and also does not have perpetual existence. The interest of a Partner in a Partnership firm cannot be transferred easily. The ownership structure of a partnership firm does not allow investments from Angel investors/ Venture Capitalists/Private Equity Firms. Also, Banks and Financial institutions prefer lending to Companies over Partnership Firms as the regulatory requirements for financial reporting of companies makes them a more transparent structure

PARTNERSHIP FIRM TAXATION
A partnership firm can be assessed as a partnership firm or as an association of persons (AOP). The interest paid to partners, salaries, bonuses, commissions, or remuneration to a partner is allowed as a deduction paid to a working partner. However, if the Partnership Firm is assessed as an AOP, the above mentioned deductions are not allowed to be claimed. Thus, for a partnership firm, it is more of an advantage to be assessed as a partnership than as an AOP. For a partnership to be assessed as a firm, the partnership deed of the firm has to be presented. The Income tax return of a partnership firm is filed in Form ITR-5.

PARTNERSHIP FIRM REGISTRATION PROCESS

Our team of tax and legal experts at ACE ALLIANCE can help you register a partnership firm anywhere in India in seven working days. Our team member will brief you about the process and provide you with a list of documents that are mandatory for the registration of partnership firm. Once, the documents and information are verified, a partnership deed will be drafted and sent to all your partners. All the Partners must sign the document on stamp paper and upload a copy on the platform. Once, the signed partnership deed is available it is registered with the concerned Registrar of Firms and the Certificate of Registration of Partnership Firm is provided.