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A Partnership Firm is a popular form of business constitution for businesses that are owned, managed and controlled by an Association of People for profit. Partnership firms are relatively easy to start are is prevalent amongst small and medium sized businesses in the unorganized sectors. With the introduction of Limited Liability Partnerships in India, Partnership Firms are fast losing their prevalence due to the added advantages offered by a Limited Liability Partnership.
There are two types of Partnership firms, registered and un-registered Partnership firm. It is not compulsory to register a Partnership firm; however, it is advisable to register a Partnership firm due to the added advantages. Partnership firms are created by drafting a Partnership deed amongst the Partners and Constitutional Counsels can help start a registered or un-registered Partnership firm in India.
Reasons to Register a Limited Liability Partnership
Documents Required for OPC Registration
Identity and Address Proof
Identity and address proof will be required for all directors and shareholders of the company to be incorporated. In case of Indian nationals, PAN is mandatory. For foreign nationals, apostilled or notarised copy of passport must be submitted mandatorily. All documents submitted must be valid. Residence proof documents like bank statement or electricity bill must be less than 2 months old.
Registered Office Proof
All companies must have a registered office in India. To prove access to the registered office, a recent copy of the electricity bill or property tax receipt or water bill must be submitted. Along with the utility bill, rental agreement or sale deed and a letter from the landlord with his/her consent to use the office as a registered office of a company must be submitted
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OPC Registration FAQ,s
How many people are required to start a Partnership firm?
A minimum of two Persons is required to start a Partnership firm. A maximum number of 20 Partners are allowed in a Partnership firm.
What are the requirements to be a Partner in a Partnership firm?
The Partner must be an Indian citizen and a Resident of India. Non-Resident Indians and Persons of Indian Origin can only invest in a Proprietorship with prior approval of the Government of India.
What are the documents required to start a Partnership firm?
PAN Card for the Partners along with identity and address proof is required. It is recommended to draft a Partnership deed and have it signed by all the Partners in the firm.
What is the capital required to start a Partnership firm?
There is no limit on the minimum capital for starting a Partnership firm. Therefore, a Partnership firm can be started with any amount of minimum capital.
Who will register a Partnership firm?
Partnership firms are registered by the Registrar of Firms, under the Indian Partnership Act, 1932.
What are the advantages of a Registered Partnership firm?
Only a registered Partnership firm can file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act. Also, only a Registered Partnership firm can claim a set off (i.e. mutual adjustment of debts owned by the disputant parties to one another) or other proceedings in a dispute with a third party. Hence, it is advisable for Partnership firms to get itself registered sooner or later.
How to open a bank account for a Partnership firm?
To open a bank account for a Partnership firm, a registered Partnership deed along with identity and address proof of the Partners need to be provided.
Will my Partnership firm have a separate legal identity?
No, a Partnership firm has no separate legal existence of its own i.e., the Partnership firm and the partners are one and the same in the eyes of law. Liability of the Partners is also unlimited, and the partners are said to be jointly and severally liable for the liabilities of the firm. This means that if the assets and property of the firm is insufficient to meet the debts of the firm, the creditors can recover their loans from the personal property of the individual partners.
Will my Partnership firm have a Certificate or Registration?
If the Partnership firm is registered, the Partnership deed will be registered and a Registration Certificate will be issued by the Registrar of Firms.
How to register the name of a Partnership firm?
Partnership firms are business entity that are owned, managed and controlled by one person. So Partners cannot be inducted into a Partnership firm.
How can I transfer my Partnership firm?
There are restrictions on the transfer of ownership interest in a Partnership firm. A Partner cannot transfer his/her interest in the firm to any person (except to the existing partners) without the unanimous consent of all other partners.
Can other people invest in a Partnership firm?
Indian Nationals and Indian Residents are allowed to invest in a Partnership firm without any approval. Usually those who invest in the Partnership firm become a Partner of the firm and in the absence of any agreement to the contrary, all partners will have a right to participate in the activities of the business.
What are the annual compliance requirements for a Partnership?
Partnership firm will have to file their annual tax return with the Income Tax Department. Other tax filings like service tax filing or VAT/CST filing may be necessary from time to time, based on the business activity performed. However, annual report or accounts need not be filed with the Ministry or Corporate Affairs, which is required for Limited Liability Partnerships and Companies.
Is audit required for a Partnership firm?
It is not necessary for Partnerships to prepare audited financial statements each year. However, a tax audit may be necessary based on turnover and other criterion.