What Is A General Partnership Firm?
A partnership firm is one of the most important forms of a business organization, where two or more people come together to start a business and share the profits in an agreed ratio. A partnership is easy to set up and compliance is minimal compared to companies.
Registering a partnership is not mandatory, but there are additional benefits if a partnership is registered. A partner company can register online with just a few documents in simple steps. A partnership certificate is a legal document that is created to set up a partnership. The Indian Partnership Act of 1932 is the authoritative law that governs partnership companies in India.
The maximum number of members in a partnership is 10 for banking and 20 for other companies to set up a partnership. Partner companies are not separate legal entities, while the partners are. A partnership cannot be a debtor or a creditor and cannot own property. In the eyes of law, the ownership, debit or credit of a partnership is actually for the partners. How profits or losses should be shared between the partners must be explicitly mentioned in the partnership certificate to avoid future confusion. Each partner can do other business.
A partnership company would be dissolved if the number of partners dropped below 2 in the event of death, incapacity for work or resignation.
Name of the partnership company
A partnership company can be named as long as you meet the conditions below:
The name should not be too similar or identical to an existing company that does the same business.
The name should not include words such as emperor, crown, empress, empire, or any other word that indicates government approval or consent.
A partnership deed/certificate is a written agreement between two or more partners who are willing to do business together. The certificate contains rights, duties, the share of profit, all terms and conditions that are agreed upon with the partners. A partnership certificate must include the following:
A. General Details:
The profit ratio to be shared
Information about the partners
Nature of the business
Work of the company
Dissolution/liquidation of the company
B. Specific details:
Apart from this, certain specific clauses can also be mentioned to avoid later conflicts:
- Interest on invested capital, partner drawings or partner loans to the company
- Salaries, commissions or other amounts to be paid to partners
- Rights of each partner, including additional rights to which the active partners are entitled
- Obligations and duties of all partners
- Adjustments or processes that must be followed due to the departure or death of a partner or the dissolution of the company.
- Other clauses as partners can decide in mutual discussion
Documents required to register the partnership firm
Form No. 1 (application for registration under the Partnership Act)
Original copy of the partnership certificate signed by all partners
Affidavit of intent to become a partner
Rental or leasing contract for the property/campus on which the company is located
Benefits of a Partnership firm
There is no need to appoint an auditor for general partnerships. If the company is still in registration or is not registered, annual registration with the registrar is not required. The annual conformities are also lower compared to LLP. Additionally, taxes depending on sales, service and sales tax do not have to be submitted in general partnerships.
Easy to Get Started
General Partnerships can easily begin with an unregistered partnership certificate within 2-4 working days. However, registration has its advantages and advantages. The main advantage of a registered company is that you can book courtroom lawsuits against another company or the company’s business partners for the administration of the rights set out in the Partnership Act.
Compared to LLP, a general partnership is much cheaper to buy. Even in the long run, it will still work cost-effectively because the compliance requirements are very low. For example, no auditor is required. Therefore, private companies still choose to do so, even though they are fully liable.
Frequently Asked Questions
What are the registration fees for partnership companies?
These fees depend on many factors and vary from case to case. BusinessRights offers the best prices on the market. Contact our expert to find out the details.
What is the income tax rate for partnership firms?
A partnership must pay income tax equal to 30% of total income. If total income exceeds 1 crore, a partnership must pay an income tax surcharge equal to 12% of income tax. In addition to the income tax and the surcharge, a partnership must also have a degree and a higher education. Education Cess applies to the amount of income tax and the applicable 2% surcharge. The secondary and university dropout applies to the amount of income tax and the applicable surcharge of 1%.
Why should I start a partnership company?
A partnership company is best suited for small businesses that want to stay small. Low cost, simple setup and minimal compliance requirements make it a sensible option for such companies. Registration is optional for general partnerships. It is regulated in Section 4 of the 1932 Partnership Act. With the introduction of the Limited Liability Partnership (LLP), it has lost its relevance for larger companies. This is because an LLP maintains the low cost of a partnership while offering the benefit of unlimited liability, which means that partners are not personally liable for the company’s debts.
Is the registration of a partnership company required?
No, partnership registration is not required. However, you should have a partnership registration online. Also, keep in mind that the partnership should be registered so that one partner can sue another partner or the company itself. The company should also be registered so that the partnership can bring a lawsuit to court. For this reason, it is recommended that larger companies register the partnership certificate.
What are the main aspects of a partnership certificate?
The deed should include the names of the partners and their addresses, the name of the partnership, the date the company went into operation, the capital invested by each partner, the type of partnership and the profit-sharing matrix, and the rules and regulations to be followed to include partners or the distance.
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