What is Partnership Firm?

Partnership is one of the main types of business association. A Partnership Firm is where at least two people meet up to frame a business and split the profits in an agreed proportion. Partnership business incorporates any sort of trade and commerce. A partnership firm is easy to establish with less compliance.

The Indian Partnership Act, of 1932 administers and controls partnership firms in India. At least two people are expected for the registration of the firm. The people who meet up to frame the partnership firm are knowns as “Partners”.

The creation of a Partnership Firm is an agreement between the partners. The agreement between the partners is known as a partnership deed that manages the relationship between the partners and their firms.

Benefits of Partnership Firm:

Easy to form – 

The formation of a firm is simple compared to different types of business associations. The partnership firm can be integrated by drafting the partnership deed.

Fewer Compliances –

The firm didn’t need many compliances if we compare it to LLP.  

Fast Decision –

The process of decision making in a partnership firm is speedy as there is no distinction between the owner and the board.

Sharing of Profits and Losses – 

The partners share profit & loss equally in their firm. They even have the freedom to decide the profit & loss ratio in the firm.

Difference Between Registered and Unregistered Partnership Firm:

In the terms, of the Indian Partnership Act 1932, the fundamental rule to begin your business is to execute the Partnership deed.

A Partnership Firm is a business establishment that is administrated by an association of individuals. The sole motivation of the formation of a partnership firm is to create profits and the partners are qualified for sharing the liabilities of profit and loss of the organization.

Differentiation	Registered Partnership Firm	Unregistered Partnership Firm
PROVISIONS UNDER INDIAN PARTNERSHIP ACT, 1932	It is registered under the provisions of the Indian Partnership Act, 1932 and all the benefits of the partnership act applied to it.	The provisions of the Act don’t have any significant bearing on such firms as they are not registered under the Indian Partnership Act, 1932.
CREDIBILITY AND RELIABILITY	Credibility and Reliability among every partner as the firm is registered.	As these organizations are not registered, credibility and reliability can’t be kept up with.
CAPACITY TO CLAIM SET-OFF	If an outsider records a case of evidence against a registered partnership firm; the firm can claim a set-off.	The ability to guarantee set-off is inaccessible for firms that are not registered under the Indian Partnership Act, 1932.
CONVERSION	Registered partnership firms can convert easily into Limited Liability Partnership or a Private Limited Company.	For the conversion into a Limited Liability Partnership or a Private Limited Company firstly, a non-registered firm should get registered under Indian Partnership Act 1932.
INCOME TAX BENEFITS	Registered partnership firms can claim the tax benefits under the provisions of the Income Tax Act.	Non-registered partnership firms cannot claim any kind of tax benefits because they are not registered under Indian Partnership Act 1932.

Forming of Unregistered Partnership Firm

Unregistered Partnership Firm deeds are executed on a stamp paper and essentially notarized by a public notary. 

One can apply for a PAN card and open up a bank account based on an unregistered partnership deed. An unregistered Partnership is separated from being notarized and additionally registered with the District Magistrate of the area from where the firm belongs.

Is Registering a Partnership Firm Important?

Partnership firm registration isn’t mandatory and is at the choice of the partners they want to register their firm or not. But a partnership firm is not able to take legal advantages if it isn’t registered, henceforth it is always advisable to do so.

The advantages of enlisting the firm are referenced in Sec 69 of the Indian Partnership Act and they have been elaborated below:

Eligible to file the case in a Court by a partner against the firm or other co-partners –

Assuming that any dispute emerges among the partners and the firm, and the debate depends on the rights emerging from the contract or upon the rights given by the Partnership Act, then a partner of the registered partnership firm can document or file a case in the court.

An advantage of filing a case in Court by a firm against outsiders –

The partners can document or file a case in the court (whenever expected), to authorize any right emerging from the contract, for example, at the time of recovery of an amount of any products supplied.

Ability to claim set-off –

Assuming an outsider sues the firm to recover an amount of cash then the registered partnership firm can claim a set-off.

Partnership Firm Registration:  

The documents required are –

• Partnership  Deed – 

It can be oral, but usually, it should be written to keep away from any future clash. A partnership deed is made on a legal stamp paper got from the individual State Registrar’s Office and must be signed by every partner. It contains privileges and obligations of the firm and the partners.

Documents of Firm –

• PAN card of the firm 
• Address Proof 

Note: If the registered office place is on rent then the rent agreement and one service bill (power bill, water bill, local charge bill, gas receipt etc.) must be submitted. Additionally, NOC from the property owner will be submitted.

Extra Documents Needed – 

• Affidavit
• GST Registration
• Current Bank Account