Incorporations

Partnership Firm

Partnership Firm with Udyam (MSME) and GST Registration (optional).

Complete By* : 18 Mar, 2024

Pricing Summary

Traditional CA/CS Price : ₹ 10,000 /-

Other Online Price : ₹ 7,500 /-

Our Base Price : ₹5,228 /-

Govt. fees & taxes : ₹1,072 /-

You Pay: 6,300/- all inclusive

Government Fee included in above

You Save : ₹1,200/- to- 3,700 /-

What do you get?

15 Mins free Consultation with an EXPERT

GST Registration (optional)

ePAN, eTAN

Udyam (MSME) Registration #

# service available only if eligible for MSME registration

Why Should You Choose SeedUp for

Registering your Partnership Firm?

SAVINGS

in cost, most economical

FASTEST

completion of assignment

ADHERENCE

to compliances, giving you all that matters

RESPONSIBLE

towards your specific requirements

HASSLE FREE

we only ask for required documents

What is a Partnership Firm?

 

Partnership firm is a business entity where two or more parties come together after executing a formal agreement (known as Partnership Deed) to own and manage the business. Partnership firm is an ideal choice of business entity for small enterprises wherein two or more persons partner together to own a business and share the profits or losses. Partnership firms are governed by the Partnership Act, 1932.The ceiling limit on number of Partners is 50. A Partnership Firm having more than 50 Partners is declared as an illegal association.

 

A partnership firm does not have a separate identity from its partners. The liability of Partners is not limited and can extend to personal assets of Partners. 

 

The action of an active Partner can hold another liable.The partnership firm may dissolve due to removal or death of any Partner subject to clauses of Partnership Deed. 

 

Information or the data of a Partnership firm is not disclosed on any public platform.  

 

Documents Required

PAN Card (of each Partner)

Aadhaar Card (of each Partner)

Passport Size Photo (of each partner)

Partnership firm name, address details

Rental agreement details, if any

* (All documents in Pdf scanned. Image file in jpeg format)

* (All documents to be Self Attested and signed on each page)

Incorporation

Partnership Firm

Steps for Incorporation

Collect information and documents

Drafting of Partnership Agreement

Execute the Partnership deed

Notarise Partnership Deed (optional)

Registration of Partnership Deed (optional) #

Apply for PAN & TAN

Apply for GST

Apply for MSME (Udyam Aadhaar) @

# Costs not covered under price quoted above

@service available only if eligible for MSME registration

Advantages and Disadvantages of

Partnership Firm

As per Section 4 of The Indian Partnerships Act, 1932, “Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Registration of partnership is not compulsory but registering it gives advantages to the partnership.

Advantage

Easy Formation: A Partnership Agreement has to be executed.. Registration of this Agreement is desirable, but not mandatory. Flexibility: Reaction to changing business scenarios is very quick. Increased Capital resources

Advantage

Diffusion of Risk: Since the partners also share the risk, the loss of one person is reduced Unlimited Liability: The liability of the partners is unlimited. The partners’ personal assets may be at risk. Tax benefits

Disadvantage

Unlimited Liability: The liability of the partners is unlimited. Just as in proprietorship, the partners’ personal assets may be at risk if the business cannot pay its debts. Divided Authority: Disagreements between the partners over enterprise matters have destroyed many partnerships.

Disadvantage

Lack of Continuity: Death or withdrawal of one partner causes the partnership to come to an end. Risk of Implied Authority: Each partner is an agent for the partnership business. Hence, the decisions made by him bind all the partners.

Partnership Firm vis a vis other business structures

Parameter

Sole Proprietorship

Partnership

One Person Company (OPC)

Limited Liability Partnership (LLP)

Private Limited Company

Statute

Common Law

Common Law – unregistered

Indian Partnership Act, 1932- registered

Companies Act, 2013

Limited Liability Partnership Act, 2008

Companies Act, 2013

Ownership

The Proprietor- an individual

Minimum 2 partners ( a company can be a partner)

Division of Labour-

O/ship- Promoter (only one)

Daily working- Board of Director(s) (OPC may have more than 1 director)

Division of Labour-

O/ship- All partners

Daily working- Designated Partners

Division of Labour-

O/ship- Promoters and shareholders

Daily working- Board of Directors (at least 2 directors)

Legal identity & Liability

No distinct PAN.

No separate legal entity. Proprietor to bear all liabilities.

 

Distinct PAN.

No separate legal entity from its partners. Private assets of the partners can be used to meet the liabilities of the firm in case firm's assets are not adequate to meet its liabilities.

Distinct PAN

Separate legal entity

Limited Liability. Personal property does not get attached

 

Distinct PAN

Separate legal entity

Limited Liability. Personal property does not get attached

 

Distinct PAN

Separate legal entity

Limited Liability. Personal property does not get attached

 

Funding

Owned funds. Difficult for bank loans. Collateral of personal assets.

Owned funds. Difficult for bank loans. Collateral of personal assets.

Owned funds or debt. Cannot raise or offer equity

Owned funds. Debt funds can be managed.

For startups, Investors do not like to invest in this type of business entity

Best option if looking for business expansion I long run. Both Debt and Equity permitted. 

Costs:

  

Incorporation

NIL

Very minimal.

If registered, then cost for registration. May go upto 10000/-

Presently greatly reduced. CG charges- NIL upto 15 Lakhs

Stamp Duty payable to State Governments ranging from 200/- to 10000/-

Very minimal.

Presently greatly reduced. CG charges- NIL upto 15 Lakhs

Stamp Duty payable to State Governments ranging from 200/- to 10000/-

Recurring

Trade license

Trade License

Tax Audit depending on Turnover

Filing of Forms

Auditor Fees

ITR filing fees

Other business registrations

Filing of Forms

Auditor Fees- if Turnover exceeds 40 Lakhs

ITR filing fees

Filing of Forms

Auditor Fees

ITR filing fees

Other business registrations

Taxation

Depends on personal tax slabs

Taxed at 30%. Remuneration

paid to partners can be

claimed as deduction,

restricted to the limits

speci‑ed (under the IT Act).

MAT does not apply.

No general advantages

(industry specific advantages are available). Tax to be paid at flat rate of 30% on profits, Dividend taxable in hand of receiver.

Minimum

Alternate Tax (MAT) applicable

No general advantages

(industry specific advantages are available). Tax to be paid at flat rate of 30% on profits. MAT is applicable.

Taxes on Income The following rates are applicable to the domestic companies for AY 2020-21 based on their turnover (excluding cess & surcharge): 

 

Sections

Tax rate

Surcharge

Section 115BA (Applicable Manufacturing Domestic Companies

25%

7%/12%*

Section 115BAA (applicable domestic companies)

22%

10%

Section 115BAB (manufacturing)

15%

10%

Any other case

30%

7%/12%*

Dividend taxable in hand of receiver. Minimum

Alternate Tax (MAT) applicable

Going Concern

Not survive if proprietor departs

Departure of any partner brings it to an end

Nominee is mandatory to be appointed. It will continue

It will continue even if a partner departs

It will continue as it has perpetual succession.

Why a Partnership Firm?

The Indian Partnership Act 1932 defines a "Partnership" as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually, "partners" and collectively "a firm", and the name under which their business is carried on is called the "firm-name". The relation of partnership arises from contract and not from status; and, in particular, the members of a Hindu Undivided Family carrying on a family business as such, or a Burmese Buddhist husband and wife carrying on business as such are not partners in such business.

Registration Process

Registration of partnership firms is optional and at the discretion of the partners and it may even be done at any point of time. But, it is always advisable to register the firm since registered firms enjoy special rights which aren’t available to the unregistered firms.

  • Execute the Partnership deed
  • Specimen of Affidavit and execute the oath or undertaking duly signed by all the partners
  • Collect all other documents to be attached eg: PAN card of all Partners and firm, Office Address proof (Rent/Lease Agreement/Sale Deed)
  • Fill and file the application for registration of Partnership in Form 1 with the Registrar of Firms (RoF) 
  • Verification of Documents by RoF
  • Issuance of Certificate of Registration by RoF and entering of name of the firm in the Register of Firms

 

Effect of Non Registration

● The Firm cannot file a case / suit to enforce a right arising from a contract or conferred by the Partnership Act, 1932 can be instituted in any Court by or on a behalf of any partner of the firm. 

● The Firm cannot file a case / suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party. 

● The Firm cannot file a case / suit to enforce any right for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realise the property of a dissolved firm shall be instituted in any Court by or on behalf of any partner in a firm against the firm or any person alleged to be or have been a partner in the firm

 

 

FAQs

What are the grounds on which a partnership will be declared invalid? 

If the partnership firm is not registered, the court may deem a partnership invalid. In other cases, if the object of the business is illegal, the court may consider the partnership invalid and dissolve the partnership. 

 

What is the scope of liability when it comes to partnerships? 

Every partner is jointly liable with all the other partners and also in their individual capacity, for all acts/activities of the firm, during the course of business while he/she is a partner. This means that if a loss or injury is caused to any third party or a penalty is levied during the course of business all partners will be held liable even if the injury or loss was caused by one of the partners. 

 

What are the tax implications for a Partnership firm? 

Income Tax at a flat rate of 30% is levied on Partnership Firms.The share of the partners in the total income of the firm is exempt in the hands of the partners as the same has already been taxed in the hands of the partnership firm. 

 

What are the rights of the partners after dissolution of the firm? 

Every partner will be entitled to have the property of the firm after payment of liabilities of the firm and thereafter the surplus would be distributed among the partners after dissolution. 

 

What happens if there is no partnership agreement? 

If there is no written partnership agreement, partners are not allowed to draw a salary. Instead, they share the profits and losses in the business equally. The agreement outlines the rights, responsibilities, and duties each partner has to the company and to each other. 

 

Can Minor join as a partner?

A minor cannot become a partner. However, a minor can be admitted to the benefits of the partnership firm. The minor can share the profits of the partnership business with the consent of the other partners. The minor can also access, inspect and copy the accounts of the firm. Though the minor is not personally liable for the losses of the firm, his/her share in the partnership business is liable for the losses incurred. 

 

Can NRI join as a partner?

NRIs can also form partnership firms where the firm should have at least one resident Indian partner

 

Can a Foreign National join as a partner?

Foreign Nationals cannot form a partnership firm in India, nor be a partner in a partnership firm in India. They can do so in a Limited Liability Partnership.

 

Conversion of partnership into Company?

The partnership can be converted to a company by filing the requisite form and following the incorporation process applicable to a Company. 

 

 

 

Who is an NRI?

As per RBI- A ‘Non-resident Indian’ (NRI) is a person resident outside India who is a citizen of India.

 

As per Income Tax Act, 1961 "non-resident" means a person who is not a "resident", and for the purposes of sections 92, 93 and 168, includes a person who is not ordinarily resident within the meaning of clause (6) of section 6 ;

 

The word “person" includes—

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the preceding sub-clauses.

 

Explanation.—For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains;

 

How to determine that an Individual is NRI?

'Non-resident Indian' is an individual who is a citizen of India or a person of Indian origin and who is not a resident of India. Thus, in order to determine whether an Individual is a non-resident Indian or not, his residential status is required to be determined under Section 6. As per section 6 of the Income-tax Act, an individual is said to be non-resident in India if he is not a resident in India and an individual is deemed to be resident in India in any previous year if he satisfies any of the following conditions:

 1.  If he is in India for a period of 182 days or more during the previous year; or

 2.  If he is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year.

However, in respect of an Indian citizen and a person of Indian origin who visits India during the year, the period of 60 days as mentioned in (2) above shall be substituted with 182 days. The similar concession is provided to the Indian citizen who leaves India in any previous year as a crew member or for the purpose of employment outside India.

 

The Finance Act, 2020, w.e.f., Assessment Year 2021-22 has amended the above exception to provide that the period of 60 days as mentioned in (2) above shall be substituted with 120 days, if an Indian citizen or a person of Indian origin whose total income, other than income from foreign sources, exceeds Rs. 15 lakhs during the previous year. Income from foreign sources means income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India).

 

An Indian citizen shall be deemed to be resident in India only if his total income, other than income from foreign sources, exceeds Rs. 15 lakhs during the previous year. For this provision, income from foreign sources means income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India).

 

However, such individual shall be deemed to be Indian resident only when he is not liable to tax in any country or jurisdiction by reason of his domicile or residence or any other criteria of similar nature.

 

Thus, from Assessment Year 2021-22, an Indian Citizen earning total income in excess of Rs. 15 lakhs (other than from foreign sources) shall be deemed to be resident in India if he is not liable to pay tax in any country.

 

A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India.

6. For the purposes of this Act,—

 

(1) An individual is said to be resident in India in any previous year, if he—

 

(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or

 

(b) [***]

 

(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.

 

Explanation 1.—In the case of an individual,—

 

(a) being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted ;

 

(b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted 30[and in case of 31[such person] having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year, for the words "sixty days" occurring therein, the words "one hundred and twenty days" had been substituted.]

 

Explanation 2.—For the purposes of this clause, in the case of an individual, being a citizen of India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed.32

 

33[(1A) Notwithstanding anything contained in clause (1), an individual, being a citizen of India, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year shall be deemed to be resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.]

 

A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India.

 

 A company is said to be a resident in India in any previous year, if—

 (i) it is an Indian company; or

(ii) its place of effective management, in that year, is in India.

Explanation- For the purposes of this clause "place of effective management" means a place where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance made.

 

Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India.

 

NOT ORDINARILY RESIDENT

 A person is said to be "not ordinarily resident" in India in any previous year if such person is—

 

(a) an individual who has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or

 

(b) a Hindu undivided family whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less 35[; or

 

(c) a citizen of India, or a person of Indian origin, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year, as referred to in clause (b) of Explanation1 to clause (1), who has been in India for a period or periods amounting in all to one hundred and twenty days or more but less than one hundred and eighty-two days; or

 

(d) a citizen of India who is deemed to be resident in India under clause (1A).

 

Explanation- For the purposes of this section, the expression "income from foreign sources" means income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India) and which is not deemed to accrue or arise in India.

 

Documents Required

Partnership Deed

Partnership deed is created on a judicial stamp paper and has to be signed by all the

partners. It contains rights and duties of the firm and the partners.

 

Partner’s Documents

● PAN card of partners – All partners are required to submit their PAN number as identity proof. 

● Address proof of partners – Partners can submit Aadhar Card, driving license, passport or Voter ID card as address proof. Name and other details on address proof should match PAN card details

 

Firm’s Documents 

Partners need to apply PAN of the firm 

● Copy of utility bills (telephone bill, mobile bill, electricity of gas bill -last 2 months), along with the rent agreement for address proof 

● If GST registration is required,, a firm needs to submit PAN number, address proof, identity and address proofs of the partner. Authorised signatory will sign the application either using a digital signature certificate or E-Aadhar verification. 

● Current Bank Account needs to be opened in the name of the firm and documents as required by the bank are to be submitted (Partnership deed, Firm PAN card and address proof, details of partners, and authorisation letter of partner who would act as the authorised signatory for the bank)