ALL ABOUT PARTNERSHIP FIRM
A firm or company which is run by two or more people together with a vision of making profits through the business done by the company. Such a company or a firm is termed as a partnership firm. The members are called the partners in the company. The Indian Partnership Act of 1932 had introduced the concept of a partnership firm and this act is the one who governs these kinds of firms in India.
CHARACTERISTICS OF A PARTNERSHIP FIRM
- Partners :
The number of partners in a partnership firm vary from firm to firm. The minimum number of partners in a partnership firm is two. Two partners can come together and register for a partnership firm. If the partnership firm is a banking firm or company, then the maximum number of partners can only be 10 in this case. The government has upped the limit for the maximum number of partners to 20 for a non-banking partnership firm.
- Registration :
The most important characteristics of a Partnership firm is that they do not need to register themselves for functioning. A partnership firm is not confined to register itself as a partnership firm. But most of the partnership firms do register themselves because of the benefits that come with it. If a partnership firm decides to register themselves with the concerned agencies, they get a lot of benefits legally. It is not at all compulsory under the Companies Act of 2013. An oral agreement among the potential partners can also be considered an official deal to appoint partners in a partnership firm.
- Liability :
Just like in a sole proprietorship, a partnership firm also has the same kind of liability. In a partnership firm, liability is both of the individual and the firm as a community. In case debt is on the partnership firm, the creditors have all the rights to revive the cost of the loss by claiming the private property of one or all the partners of the partnership company.
- Interest :
In a partnership firm, a partner can not transfer his/her share of the partnership initially agreed on to any other person or any other partner. Because by doing so the person to whom a partner might share his/her partnership assets, the person getting that share becomes a partner in the partnership firm. It can not be done without the consent of all the existing partners of the partnership firm.
PROCESS OF REGISTERING FOR A PARTNERSHIP COMPANY
As a partnership company is not under any compulsion to get themselves registered under the Partnership Act of 1932. However to be legally visible and to gain the status of a partnership company under the government, it is advisable for all the partner companies to get themselves duly registered.
- Application to be sent: An application asking for starting the process of registration is to be sent to the Registrar of Firms either by post or now you can even fill up an application online on the official website of Registrar of Firms. Along with this application certain other information and their proofs also need to be submitted. The name of the partnership firm, name and address proof of all the partners, address proof of the office, the proposed duration of the partnership and the date of joining of the partnership.
- The next step is to get a signed copy of the Partnership Deed containing all terms, conditions and the duration of the deed. This partnership deed needs to be submitted to the registrar of firms. Only after a properly signed partnership deed in the name of the concerned partnership firm, the registration process is taken forward.
- Stamp duties and the minimum fee is to be deposited by the applicant. These are application fees and need to be filled in to the concerned authorities for the completion of the first step of the Partnership firm.
- After the successful registration of the Partnership firm’s application, the form is entered into the official records online and the Registrar of Firms will issue a certificate of incorporation to the applicant. The certificate of incorporation is important for a partnership firm as it confirms and acts as proof for the authenticity and existence of the partnership company. This is the last step for the registration of a partnership firm.
DOCUMENTS REQUIRED FOR A PARTNERSHIP FIRM
- Partnership Deed :
A partnership can be oral but mostly a partnership deed is signed by all the proposed partners to retain the authenticity of the deed.
- Identity proof of the partners :
All the proposed partners of the partnership firm have to submit their PAN card as proof of their identity to the concerned authorities.
- Address Proof :
All the partners have to submit their address proof by opting for any one document from Adhar card, Voter ID, Passport, driving license etc.
- Address proof of the partnership firm :
If the registered office place is rented, rent agreement and one utility bill (electricity bill, water bill, property tax bill, gas receipt etc.) have to be submitted. Also, NOC from the landlord will be submitted.
If the registered office place is the person’s own property, the utility bill has to be submitted which has to mention the name of the owner. Also, a NOC ( no objection certificate) from the owner of the property being used as the office has to be submitted.
ADVANTAGES OF A PARTNERSHIP FIRM
- Partnership firms are one of the easiest to start among all the other types of companies and firms. The only requirement for starting a partnership firm in m is a partnership deed which can either be oral or written agreement. Moreover, it is not even compulsory to register for a partnership firm. Hence, a partnership can be started on the same day as an individual and his/her partners wish for it to be launched.
- Decision making is the crux of any organization be it a business firm or a corporation. Decision making in a partnership firm could be faster as there is no concept of the passing of resolutions. No resolutions need to be passed around for passing a management change or minor change of decisions. All the partners in a partnership firm enjoy a wide range of powers and can easily and effectively undertake any transaction on behalf of the partnership firm without the consent of other partners. Individual powers of all the partners are retained in this way.
- Every partner owns and manages the activities of the partnership firm. Their tasks might be varied in nature but people in a partnership firm are united for a common cause. That is the sole reason of them being partners of a partnership firm in the first place itself. Ownership of a company or a firm creates a higher sense of accountability in all the individual partners, which paves the way for a highly motivated and dedicated workforce in the partnership firm.
- When compared to any other firms and companies like a proprietorship firm or a private limited company, a partnership firm can easily raise funds for themselves. Multiple partners make for more feasible contribution among the partners of a partnership firm. All the individual partners can come together and raise the funding for their common ownership of a partnership firm. Moreover, banks also view a partnership more favourably while sanctioning credit facilities like loans instead of any other types of firms like a proprietorship firm.
DISADVANTAGES OF A PARTNERSHIP FIRM
- Every partner of a partnership firm is liable personally for the losses or debts cases of his/her partnership firm. The liability created by any individual partner in the partnership firm will also make each of the partner personally liable for every finance and money related issue of the partnership company. To limit the liability of partners to some extent in a partnership firm, the LLP structure was announced by the Government for the easy functioning of a partnership firm in times of debts and capital losses.
- Leadership can be both help in the management sector of a firm or a company and it also uplifts the firm but lack of leadership can also result in loss derailing os a firm. Combined ownership can largely take away the possibility of a much-required leadership in companies and firms and lack of leadership leads to directionless operations in the name of a partnership firm. This lack of a central figure can sometimes cause hindrance in the proper functioning of the partnership firm.
- A partnership firm is easy to start and does not require any kind of registration to operate and commence its business in the market. A partnership firm can also operate without any rigid structure and regulation because of this. Hence, it often leads to distrust amongst the general public because they may perceive a partnership firm as a fraud because of its no legal registration in the registrar office of firms. The partnership firm may end up losing its customers this way and this is the reason why many partnership firms, even though they do not, register with the registrar of firms.