In simple words partnership firm is about joining of two or more people to carry out any legal business. Partnership firm is one of the traditional and easiest ways to start a business. The partnership firm can be registered with a sub registrar office or can be an unregistered firm. Compare to other modes of business set up like Company or LLP, partnership firms are easy to register, easy to run and even easy to shut down.
Can NRI Set up Firm-
Non-Resident Indians can also a register a partnership firm. But whatever investment or profit accrued in India cannot be repatriated.
Why one choose to register a partnership firm:
Easy to Start - Starting a partnership firm is straightforward. Just an agreement among the partners creates the partnership firm. A partnership company can be established and registered later, as registration is voluntary and not mandatory.
Less Compliances - Compared to a company or LLP, the partnership company has to comply with very few compliance regulations. As a firm just at year end Income Tax Compliance should be made, no need to file any annual return or any other forms with Registrar of Companies, which are required in the cases of Company or LLP.
Decision-making process - Since the partners are the owners of the firm, they need not required to approach any authorities for any guidance or prior approval. Hence the decision-making will be expeditious and faster.
Easy to Exit- When a partner leaves the firm, the paperwork associated with that is bit less compared to the company or LLP format. IN addition to this even a closure of the partnership firm also fairly simple.
Suitable Business- Ideally the partnership model is suitable for firm which is into Service or Trading segment or MSME .
Registration of Firm and Benefits
While firm registration is not compulsory, it is advisable to do so and registration provides both the firm and the partners the right to sue third parties. Following are the details required for setting up of Firm:
Application for Registration - The application must be filed with the Registrar of Firms of the respective state and must be signed by the partners. The application must include the following :
The name of the firm
The principal place of business of the firm
The location of any other places where the firm carries on business
The date of joining of each partner
The names and permanent addresses of all the partners
The duration of the firm
The Profit or loss share Ratio
The capital Ratio
The details of the signatory to the bank account.
Steps after Firm Registration:
Once the Firm is Registered or deed is executed, there are a few steps to be followed by the firm, those are:
Making an application for Permanent account number for the firm.
Making an application for TAN number for the firm.
Opening a Bank account in the name of the firm.
Obtaining a respective State Govt. prescribed registrations like Professional tax or Shops and Establishment etc.
Making an application for GST return if the turnover is above the limit prescribed under the GST laws.
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