4 Reasons to Register Your Partnership Firms
In recent years, the majority of start-ups have evolved into partnership enterprises. In India, proprietorship and partnership firms are the most common company kinds. Among the two, partnership firms are the most common. The Indian Partnership Act of 1932 governs partnership firms in India. The chances of having a successful business in a partnership firm are excellent. The partners exchange business ideas and complement one another’s flaws. However, as with any business, there is a danger that it will not succeed as planned. Worse, the firm may not succeed only as a result of one or more partners.
Disagreements may emerge under these instances, necessitating legal action. It is for this reason that having the company registered is desirable. Tax Help Desk is your perfect solution for partnership firm registration online and professional tax registration online. Keep reading this blog to learn more.
Benefits of Registering a Partnership Firm:
The following are some of the benefits of forming a partnership:
Potential to sue the firm or the other partners
If a dispute arises between the partners, between current and previous partners, or even between one of the partners and the firm itself, and the dispute arises out of the terms dictated in the partnership deed, or the dispute is over the rights vested in the partner by virtue of the Partnership Act, then a partner belonging to the firm in which the partnership is registered can always sue the firm. A partner in an unregistered firm does not have this privilege, albeit he can file a criminal complaint against the wronged partner (s).
The capacity of the firm to sue third parties
When one or more partners in a registered partnership firm’s contracts are not honored, one or more partners can always file a lawsuit in court. This leniency is not extended to unregistered firm partners.
Right to use the principle of set-Off
If the partnership firm is served with a summons to recover a debt owed to it by another party, the firm can apply the principle of set-off against the third party if the latter also owes the partnership firm money. The sum owed to the third party can simply be offset by the registered partnership business. In the case of unregistered partnership firms, this arrangement is not possible.
Better credibility
Despite the fact that both a registered and unregistered partnership firm is legal under the Partnership Act, a registered partnership firm appears more credible in the eyes of a potential client.
Procedure to register a partnership firm
Partnership deed
When the partners decide to register their business, the first document they should prepare is a partnership deed. The deed must be written according to the Indian Partnership Act of 1932. The deed might be finalized depending on the business and the terms and conditions between the partners. A deed specifies several components necessary to run a successful business, such as salaries to be paid, profit and loss allocation, interest on capital, exit strategy, and so on.
Execution of partnership deed
Once the current partners have reached an agreement on the written deed, the deed will be executed by paying the required stamp duty. The stamp duty is determined by the state in which the deed is recorded. It is also necessary to have the deed notarized. All of the partners should sign the agreement. The signatures of the witnesses must also be recorded in the partnership agreement.
Stamp duty and notary procedure:
Once the stamp duty payments are made as prescribed by the Stamp Act of the respective state where the firm’s operation is located, the partnership deed is executed. The deed can be executed on non-judicial stamp paper or through franking. The major distinction between stamping and franking is that stamp duty denotes the legitimacy of the documents, whereas franking denotes their authenticity. The term franking refers to the deposit of fees or taxes, such as stamp duty. Payment is made through banks in franking, which is similar to stamp paper. The deed is notarized when the stamp fee is paid and the signatures of the partners and witnesses are gathered.
Obtaining a PAN for the partnership firm
A Permanent Account Number (PAN) can be obtained before or after the partnership firm’s registration. This is possible in both online and offline modes. Most states allow you to apply for a PAN while filling out an application to register a partnership firm registration online. A supporting copy of the partnership deed must be attached to the PAN application.
Partnership deed registration
The partnership firm is registered with the Registrar of Firms (Roof) in the jurisdiction where it is located. The application form contains information such as the firm’s name, the names of the partners and their contact information, the location of the business, the time period during which the business was operating, and so on. The Registrar has the authority to request the provision of documents and proofs, and the partners must comply.
Opening of a bank account
Typically, the partnership firm’s only goal is to engage in business activity. As a result, it is clear that the company requires a bank account to conduct everyday operations on its behalf. As a result, a current account is opened in the firm’s name. The bank receives all of the necessary documentation connected to the partnership firm.
Although the Indian Partnership Act of 1932 does not need a partnership firm to be registered, it is recommended. After its incorporation, the company can register at any moment, according to the Act. A registration application cannot be filed after a third party has filed a lawsuit against the partnership business. Although a partnership firm begins with the greatest of intentions, the entering partners must be practical and astute enough to anticipate the inevitable and make informed judgments by registering their partnership firm. Tax Help desk is your one-stop solution for partnership firm registration online and professional tax registration online in just a few simple steps.
