Partnerships are based on two or more people working together in a business to gain lots of profits. If one of them is not in agreement with the other, it can affect the Business. In India, there are various types of business structures available. So, as the Partnership Firm. Many business people choose the business structure as a partnership.
The best part about the Partnership Firm Registration is that there is a legal partnership deed which is signed by all types of partners in the company. So, the Company Incorporation is not so easy, but beneficial in terms of the various types of conditions. Let’s explore more about Partnership registration in detail. You must notice a few points before registering. But before that let’s understand what is a partnership firm and what features it does offer to all the businessperson.
What is a Partnership firm and Why is Registration important?
A partnership is a type of business entity in which two or more people come together to provide the services or products and work to gain profit with unlimited liabilties . They have signed an agreement of partnership deed where it’s mentioned that partners agree to share the profits in a discussed percentage. The Indian Partnership Act, 1932 describes “Partnership” as the relationship between individuals who have agreed to share the company’s profits carried out by all or any of them acting for all.” Hence, individuals who agree to form a business entity partnership form are individually called partners. Also, the individuals forming a relationship are collectively referred to as a “firm.”
The minimum number of persons needed to form a partnership form of company is 2 under the Companies Act, 2013.
Important things to Highlighting Before Partnership Firm Registration:
1. Important Agreement and Document – Partnership Deed
The Partnership Deed is simply a contract detailing the rights and obligations of all the business entity partners. The Deed is enforceable by statute and serves as a guide to the partners in conducting business operations on a regular basis.
The following are the main elements of the partnership deed:
- Name, principal address, and a brief overview of the Business carried out by the partners.
- Important financial data, such as:
- Capital sum invested,
- Sharing Profit and Loss,
- Salaries owing and payable
- Method to assign revenue to each partner.
- Accounting system to be applied with the company’s
- Obligations, forces, and the duty of each spouse.
- Information about the required steps to be taken in the case of a partner’s withdrawal or death.
- Information on the process of altering relationship rights in the case of a partner being removed.
- Method of dissolving the relationship in the event of company termination.
2. Choose Name for a Partnership Firm Name – During Partnership Firm Registration
People May get confused with all types of company registration and Partnership firm registration. But all the rules and regulation in partnership firms follow the rules of section 58(3) of the Indian Partnership Act, 1932.
In its name, a partnership firm’s name makes sure does not include the following terms. These include Crown, Emperor, Empire, Empress, Imperial, Royal, or other terms suggesting the government’s permission or approval.
Also, remember if you pick a name that is already taken by some other firm that provides the same kind of services or products. The compulsion behind such guidelines by the MCA is to evade harming already existed business image and credibility.
3. Dissolution in a partnership firm is different from other companies structure
The dissolution of a relationship between all the partners of a company is called the dissolution of the company, as per the Partnership Act. Section 39 of the 1932 Indian Partnership Act states that the dissolution of the Partnership Firm is the dissolution of the Partnership Firm for all the partners of the partner firm. The breakup of a relationship company ends the organization’s existence. After this, no contract with others can be entered into by the partnership firm. It can only sell the assets to realize the sum, pay the firm’s liabilities and discharge the partners’ claims.
When the business gets dissolved there is some condition that is applicable in partnership firm only, these are signed at the time of Partnership Firm Registration. The termination, in compliance with a contract between the partners, of a relationship between all the partners of a firm. Also, the dissolution of a firm under forced conditions or in a situation when it becomes necessary to take such action.
This agreement in dissolution requires the disposition and disposal of all properties of the business or settlement of accounts assets and liabilities. At time of dissolution in partnership company, legal arrangements, and settlement of accounts.
4. Unlimited Liability a Partnership Firm Registration Include:
The unlimited liability of a partner is applicable to this form of business. In Partnership firm registrations clear that a partner has to pay off the debts and dues or loan of the firm even at the cost of his personal property. So, these conditions are important to notice a great level of liability is expected from the partner.
5. Protective your personal profit in a Partnership is different
The risk of staff’s profit is always there in the partnership form of business. On behalf of other partners, the active partner of a business will often make a decision. Such decisions often have the possibility of profiting from employees, which may harm the company’s interests.
The Bottom Line
Before starting a partnership business, these are some of the essentials one needs to be aware of. These key points will help you make informed decisions about a partner company and build a profitable company. Partnerships are fantastic, to begin with. But as one develops, it is possible to opt for several other business structures according to one’s requirements. Get your Company Incorporation done and Partnership Firm Registration online without any hassles with Professional CA/CS services.