The registration of a partnership firm in India is governed by the Indian Partnership Act 1932. Unlike a One Person Company or a Hindu Undivided Family, a partnership business involves two or more individuals joining forces to achieve maximum returns through joint effort. This process involves selecting an appropriate name at the time of its formation and submitting an online application form. To ensure smooth legal compliance, partners must provide requisite documents like ID proof and a Digital Signature Certificate. The complete registration process is outlined below:
Find a suitable name for your partnership firm that is compliant with the following guidelines:
A partnership deed is a written document that details the rights, liabilities, and obligations of all partners. Important elements include:
A partnership firm is registered by filing Form 1 under the Indian Partnership Act, 1932, with the Registrar of Firms (RoF) of the state where the firm will operate. Forms are available at RoF offices and can also be downloaded from state RoF websites.
After document verification, the Registrar issues the Certificate of Incorporation. This serves as legal proof of the firm’s existence and authorises it to conduct business as per law. To complete registration, partners must submit a certified copy of the partnership deed, capital details, Pin Code, and branch office details. Registration can also be done through online government portals like Startup India (additional charges may apply).
In India, the period for the completion of the registration process for a partnership firm is 10-14 working days. The exact time depends on state-specific rules and government processing times.
After acquiring the certificate, an applicant must apply to the Registrar of Firms with details about the firm, partners, duration, and a copy of the partnership deed. Payment of state fees is required. Requirements may differ by state.
Registration fees range from ₹500 to ₹3,000 depending on state. Minimum stamp paper for partnership deed: ₹200. Other possible expenses include:
| Tax | Rates |
|---|---|
| Income Tax | 30% of taxable income |
| Surcharge | 12% if taxable income > ₹1 crore |
| Interest on Capital Deduction | Up to 12% of interest paid to partners |
| Education and Health Cess | 4% of total tax including surcharge |
| Alternate Minimum Tax (AMT) | 18.5% of Adjusted Total Income (ATI) |
The profit of the firm is taxed at the firm level. Section 10(2A) of the Income Tax Act prescribes that the share of the firm's profit of a partner is not taxable in his hand. That is, the profit of the firm is taken for taxation at the firm level only, and no other tax liability arises in the hands of the individual partners on account of the share of the firm's profits.
The partnership firm benefits from the tax since the profits distributed to partners are not taxed at the firm level but are taxed at the individual level, where each partner reports their share in the concerned individual tax return. Such benefits will be applicable only provided that remuneration or interest paid to partners is in consonance with the terms of the partnership agreement. Without it, such remunerations or interest will not be deductible. Salaries, bonuses, or commissions paid to the non-working partners are not eligible for relief or tax benefits. Therefore, the partnership structure forms a benefit whereby the liabilities of tax are passed on to individual partners. The partnership terms must be complied with to maximise the said benefits.
Appointing statutory auditors is essential for a corporation to allow for proper oversight over its finances. The Board of Directors is mandated, by regulatory requirement, to appoint the statutory auditor within 30 days from the date of registration of the company. This appointment would place the auditor in charge of assessing the corporation's financial statements and adhering to legal standards. In contrast, if the Board refuses to appoint within the time called for, the members of the company are empowered to appoint the statutory auditor at an Extra General Meeting, which must be held within 90 days from the date of its registration. Thus, timely appointment of the statutory auditor ensures transparency and compliance with financial regulations, which induces stakeholders' trust and in turn ensures correct financial reporting.