What is the Registration of a partnership?
What is the Registration of a partnership?
A partnership is a popular business organization in India where two or more individuals come together to conduct business. While it is not mandatory to register a partnership, registering the firm provides various benefits and legal protections. This article will discuss the meaning, benefits, and procedure of partnership registration in India.
Registration of Partnership
Registration of partnership is a process where a partnership firm obtains a registration certificate from the Registrar of Firms. The Indian Partnership Act of 1932 governs it. This type of firm is not considered a separate legal entity from its partners; therefore, the registration certificate serves as proof of its existence. The Ministry of Corporate Affairs (MCA) governs the Registration of partnership firms in India.
Benefits of Registration
- Legal recognition: Registration of partnership provides legal recognition to the partnership firm. It helps establish the firm’s and its partners’ existence, which is important while dealing with third parties such as banks, customers, and suppliers.
- Protection of rights: Registration of a partnership helps protect the partners’ rights. The partnership agreement is a crucial document that defines the terms and conditions of the partnership. Registering the partnership protects the partnership agreement and the partners’ rights.
- Credibility in the market: Registered partnership firms have better credibility than unregistered firms. Registration assures the customers and suppliers about the existence and legitimacy of the firm.
- Easy access to credit: Registered partnership firms have easy access to credit from banks and financial institutions. Banks and financial institutions consider registered firms more credible and reliable than unregistered firms.
- Resolution of disputes: Registration of partnership helps resolve disputes among the partners. The partnership agreement is legally binding, and registered partnership firms have legal recourse in case of partner disputes.
Procedure For Registration of partnership firm
The Ministry of Corporate Affairs (MCA) governs the Partnership Firm Registration in India. The MCA has set up a portal called “MCA21” to facilitate the online Registration of partnership firms. The process and requirements for registering a partnership firm through MCA are standardized nationwide, and the same rules apply to all states.
Here is a step-by-step procedure to register a partnership firm through the MCA:
Step 1: Obtain a Digital Signature Certificate
Obtain a Digital Signature Certificate for all the partners. A DSC is an electronic signature that is used to sign documents online. Partners can obtain a DSC from a certified agency.
Step 2: Obtain a Designated Partner Identification Number (DPIN)
After obtaining the DSC, the partners must apply for a Designated Partner Identification Number (DPIN). The DPIN is a unique identification number that is required for all partners of the firm. The partners can apply for the DPIN on the MCA website.
Step 3: Choose a name for the partnership firm
The partners must choose a name for the partnership firm. The firm name must not be identical or similar to an existing company or LLP. The name must also not be prohibited by law.
Step 4: Draft the partnership deed
The partners must draft a partnership deed that describes the terms and conditions of the partnership. The deed must include the following:
- The partnership’s name.
- The partners’ names and addresses.
- The business’s nature.
- The profit-sharing ratio.
- The duration of the partnership.
Step 5: Register the partnership firm
Apply for partnership registration by applying to the Registrar of Firms in the state where the business is located. The application should contain the following information:
- Name of the partnership firm
- Names and addresses of the partners
- Date of the partnership agreement
- Nature of the business
Step 6: Obtain the certificate of Registration
After the Registrar of Firms verifies the application, a certificate of Registration will be provided to the partnership firm. The Registration certificate proves the partnership firm has been registered with the Registrar of Firms.
Step 7: Apply for PAN and TAN
The partnership firm must apply for a Permanent Account Number and Tax Deduction and Collection Account Number from the Income Tax Department. The PAN and TAN are required for tax purposes.
Registration for partnership is not mandatory in India, but it provides partners with various benefits and legal protections. The procedure for Registration may vary from state to state. Still, it generally involves preparing a deed, applying to the Registrar of Firms, and obtaining a Registration certificate. Registered partnership firms have better credibility in the market, easy access to credit, and legal protection of their rights.
