Partnership Firm

A Partnership Firm is a popular business structure in India where two or more individuals come together to run a business and share profits as per a mutually agreed partnership deed. It is governed by the Indian Partnership Act, 1932 and is ideal for small to medium-sized businesses due to its simplicity and ease of formation.

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Benefits of a Partnership Firm

Easy to Start: Partnership firms are simple to form with minimal documentation and legal formalities.
Low Compliance: Compared to companies, partnership firms have fewer compliance obligations.
Shared Responsibilities: Business management and decision-making are shared, reducing the burden on a single individual.
Better Control & Flexibility: Partners can define operational and profit-sharing terms via a customizable partnership deed.
Cost-Effective: Very low setup and administrative costs.

Eligibility Criteria

Minimum 2 partners are required to form a partnership firm.
All partners must be competent to contract (i.e., over 18 years, of sound mind, and not disqualified).
Foreign nationals are not allowed to form a traditional Indian partnership firm (they may opt for LLP instead).
A Partnership Deed must be drafted and signed by all partners.

Registration Process

Choose a Firm Name: Select a unique name for your firm.
Draft Partnership Deed: Prepare and notarize a partnership agreement mentioning roles, profit-sharing ratio, and rules.
Apply for PAN: Obtain a PAN card for the partnership firm.
Registration with Registrar (optional but recommended): Apply for registration under the Indian Partnership Act, 1932 with the Registrar of Firms (ROF).
Open Bank Account: Open a current account in the firm’s name to commence business transactions.

Documents Required

PAN and Aadhaar of all partners
Passport-size photographs
Proof of business address (utility bill, rent agreement, NOC)
Signed and notarized Partnership Deed
Address proof and identity proof of all partners
Application form (Form 1 for registration with Registrar)

Compliance Requirements

PAN Filing: File income tax return annually using Form ITR-5.
GST Registration & Returns: If turnover exceeds threshold, GST registration and monthly/quarterly returns are required.
TDS Compliance: Deduct and deposit TDS wherever applicable.
No Annual ROC Filing: Unlike LLPs and companies, there’s no obligation to file returns with the Ministry of Corporate Affairs.