Partnership firm is not a separate legal entity from the person it constitutes of; however, for income tax purpose, it is considered as a separate legal entity. A partnership firm...
It’s a kind of business structure. A partner firm is a structure that has two or more individuals that manage and operate this business. A partnership firm business is structured in accordance with the objectives and the terms that are set out in a partnership deed document. This deed may or may not be registered. In this type of business, members of the firm are all individual partners. They share all the liabilities and also the profits that are generated out of the firm. That is also mentioned in a predetermined ratio. In this article we will discuss Why Should Anyone Opt for Partnership Firm Registration?
Why should anyone set up a partnership firm?
A simple partnership firm is certainly quite a good business and it’s a small business that’ll probably also remain small. Its investments are low cost, there’s also an ease for setting up and a minimal compliance. All these features make it a very sensible business option. The partnership firm Registration is optional in the general partnerships. This Registration is governed by the law section 4 Partnerships act of 1932. Though this act has lost it’s relevance for the larger businesses. There’s been an introduction of limited liability partnership. The new limited liability partnership not only retains the low costs of a partnership but it also provides the benefits of unlimited liability partnership. Unlimited liability means that the partners involved will not be liable personally for any debts of the business.
Is a partnership firm a separate entity?
The individuals who are the partners in the partnership firm are the owners, so they are not any separate entity from their firm. Now whenever there will be any issues or any kind of debt that’s incurred on to the firm, it will be the responsibility of its owners or the equal partners.
How many partners can there be?
Any such partnership firm must at least have 2 number of partners. If it’s with regards to a banking business then it could have up to 10 partners. However in case, the business is other than banking, then that business can have up to 20 partners. All these partners can divide all the profits and losses equally.
Is partnership firm registration necessary?
Absolutely not a necessity. But if in future one feels the need to sue another partner within their firm itself, it’d require a partnership firm Registration. So, it is recommended that the larger businesses should get their Partnership firm Registration.
What are the main aspects of a partnership deed?
Your partnership deed document is supposed to contain the names of the partners and also their addresses. It should have the name of the Partnership, and the date of commencement of the firm’s operations. Any amount of capital that was invested by any particular partners among all partners. The type of the partnership it is along with the profit sharing matrix. The rules are regulations that are to be followed for both, bearing in the partners or removing any of them.
What are the documents Required for Partnership Registration?
- Form number 1 of the application for the partnership firm under the partnership act.
- Copy of the original partnership deed document. It should be signed by all the partners.
- An affidavit that declares the intention of becoming a partner.
- Rental agreement of the property where the business runs.
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