A partnership is a special type of contract and is a relation between two or more persons who have agreed to share profits of a business run by all or any one of them acting for all. The essence of a partnership is a contract between partners. It is mandatory for partners to share profits among themselves.
A partnership is one of the oldest business structures in India and is governed by the Indian Partnership Act, 1932. A partnership firm does not have an independent status apart from the partners constituting it. A partnership is not a legal entity; it has a limited identity for the purpose of tax laws. Any two people who are capable of entering into a contract can start a partnership business under an agreement called a partnership deed. The partnership agreement can be oral or written. It is not mandatory to register a partnership deed, but it is advisable to do so for evidential purposes since a firm cannot file a suit against a third party if it is unregistered.
Forming a partnership firm is simple since it does not have to be registered to start operations. A partner is an agent of the firm and all other partners. Each partner is liable for the actions of the other partners.
As the Partnership Act is administered by the various state governments, the registration of firms and further administration is managed by the Registrar of Firms appointed by each state government.
Procedure for registration of partnership
- Choose an appropriate name for the partnership The first step is to choose an appropriate name for the proposed firm. While choosing the name, due care has to be taken to see that it does not violate the trademark of any other person or prohibited emblems and names.
- Place of business: It is important that the firm should have a proper address since all official communications will be sent only to this address. The jurisdiction of the registrar will be ascertained by this address.
- Execute the partnership deed and stamp with appropriate stamp duty : By the partnership deed, the right, duties and liabilities of the partners is ascertained. All the partners to the firm are governed by the terms and conditions mentioned in the agreement. The stamp duty will vary from state to state and is based on the total amount of contribution by all partners.
- Application for registration : Along with the documents mentioned above, an application in the prescribed format needs to be submitted to the Registrar of Firms located in the jurisdiction mentioned in the official communication address. On receipt of the application, the Registrar will verify all documents. If satisfied that the provision of the Partnership Act is complied with, the Registrar will enter the particulars in the Register of Firms and issue an acknowledgment in the prescribed format.