How to Form a Partnership Firm in India ?
A Partnership is a form of organization wherein two or more individuals/ corporates agree to set up a business and agree to share ownership, as well as the proﬁt of the business by entering into an agreement. Partnership ﬁrms are governed by the Indian Partnership Act, 1932. Beneﬁts of setting up a Partnership ﬁrm: (What are the beneﬁts of setting up a Partnership Firm?) 1. Setting up a Partnership firm is comparatively less expensive than setting up a Company. 2. As compared to a sole proprietorship concern, a Partnership firm has a separate legal entity. 3. Partnership firms have less legal compliances. 4. The functions, activities and working of the firm can be mutually decided by the partners. Points to be considered while setting up a Partnership ﬁrm: (Which factors should be considered when setting up a Partnership Firm?) 1. There should be at least 2 partners to set up a partnership ﬁrm. 2. The partners should be legally competent to enter into a contract and should be of the age 18 or above. 3. Place of business, business activity, purpose, name of ﬁrm and partners should be ﬁnalized before setting up of Partnership Firm. 4. Percentage of contribution, proﬁt sharing of each partner should be decided. 5. Rights and responsibilities of each partner should be ﬁnalized. 6. Provisions for adding a new partner and exit of a partner should also be made. 7. Liabilities of partners are unlimited. 8. Every partner is liable for the debts or acts of the other partners. Which means that partners are jointly and severally (individually) liable for the partnership’s debts i.e. a partner is jointly as well individually liable. 9. A Partnership ﬁrm has a less formal structure as compared to a Company. 10. All the terms and conditions of working of Partnership ﬁrm should be mutually decided by the Partners before entering into a Partnership Deed. 11. The ﬁnal copy of the Partnership Deed should be kept in a secured place. Registering Partnership ﬁrm: (Why should you register your Partnership Firm?) • It is advisable to register the partnership ﬁrm with the local registrar of ﬁrms as a registered ﬁrm enjoys the following advantages: a. Lending institutions prefer a registered Partnership Firm over a non-registered ﬁrm. b. The registered ﬁrm has legal rights in case of disputes. c. Organizations prefer to do business with a registered ﬁrm. d. As the partnership ﬁrm gets registered, the public at large will know the existence of the ﬁrm. • While applying for registration, you have to remember that registration is a state-speciﬁc regulation. Which means that the process and documents required might change from state to state. Steps to register a Partnership Firm (For the state of Maharashtra only). (How to Register Partnership Firm in Maharashtra?) • Create a user id and password on https://rof.mahaonline.gov.in and log in to the website. • Select the option “Registration of Partnership ﬁrms”. • Then an online application in Form No 1. is to be ﬁled for registration of the ﬁrm. • In the application, the applicant will have to specify the description of partnership ﬁrm i.e. details of partners, the business of the ﬁrm, etc. ' • Once the application (i.e. Form no 1) is ﬁlled, it should be printed on a green ledger paper (a legal size green coloured paper) and it should be signed by all the partners. • The above signed application should be submitted to the Registrar of Firms (RoF) oﬃce along with the required documents. • After the application is submitted, the RoF department acknowledges the receipt of the application and then the application goes further for veriﬁcation. • If the department raises any objection, an objection letter is sent to the applicant on his email id. • To clarify the objections, the applicant has an option to modify the original application on the website. • After all the objections are cleared the applicant will receive a digitally signed copy of Certiﬁcate of Registration of Firm. It can be downloaded from the website. List of documents for registering a Partnership ﬁrm in Maharashtra: (Which documents are required to register a Partnership Firm in Maharashtra?) A. Mandatory documents: 1. Application to be ﬁled online for registration of Partnership Firm in Form A (On https://rof.mahaonline.gov.in/ website) 2. Covering letter along with Rs. 5/- Court Fee Stamp. 3. Certiﬁed Copy of the Partnership Deed (Certiﬁed by a C.A. or an Advocate) (Original is not to be submitted). 4. Certiﬁed copy of the Marathi translation of the Partnership Deed (Certiﬁed by a C.A. or an Advocate). 5. A blank stamp paper of Rs. 10/- or more in the name of Partner or ﬁrm. 6. Authority letter signed by all the Partners if the documents are submitted by a C.A or an Advocate. 7. Ownership proof of the place of business of the Partnership Firm. B. Business-speciﬁc documents: 1. If Company is a partner in the ﬁrm then a Certiﬁed True Copy of Memorandum and Articles of Association of the Company and Board resolution is required. 2. If trust is a partner in the ﬁrm then Certiﬁed True Copy of the Trust Deed is required. 3. If the business of the ﬁrm requires a license from any Government Department, then such license is also required. FAQ’s Q. What is the maximum limit for the number of Partners in a Partnership Firm? A: There can be a maximum of 10 partners in case of banking partnership ﬁrms and a maximum of 20 partners for all the other types of partnership ﬁrms. Q. Is registration of Partnership ﬁrm mandatory? A: The Partnership Act, 1932 does not mandate registration of Partnership Firm. But it is advisable to get your ﬁrm registered. Q. Is the registration process same all over India? A: Registration process will change from state to state. Hence, you will have to conﬁrm the registration process with the Registrar of Firm’s oﬃce situated near your business location. Q. Can another Partnership Firm or a Company become a partner in a ﬁrm? A: Yes, a Partnership Firm or a Company can be a partner in a Partnership ﬁrm. Q. Can a minor become a partner? A: As per the Partnership Act 1932, a minor cannot become a partner. But, with the consent of all the partners of the ﬁrm, and through an agreement executed between the minor’s guardian and other partners, the minor can be admitted to the beneﬁts of the partnership ﬁrm.