Partnership_Firm


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PARTNERSHIP FIRM

Partnership Firm is a business entity where two or more persons agree to contribute capital in a business and share profits or losses as per partnership agreement. It is a simple form of business entity for small enterprises. It is easy to form a Partnership business and it has minimal regulatory compliance. Depending on the choice of Partners, Partnership business can also be registered under The Indian Partnership Act 1932.

The following are the essential ingredients for the constitution of a partnership-

There should be an agreement between the parties
The agreement must be to share the profits/losses of the business; and
The business must be carried on by all or any of them acting for all

The advantages of a partnership include:

Partners can establish a partnership instantly, easily and inexpensively.
Partnerships carry little, if any, ongoing formalities.
Partnership business is a simple form of business entity for small enterprises.
Partnership business can also be registered as compared to Proprietorship.

Disadvantages

Unlimited Liability
Lack of Harmony
Limited Capital
Transferability of ownership

Common Registrations for Partnership Firm

TAN /PAN Registration: PAN and TAN registration are required to be taken from the Income Tax Department for filing of Income Tax returns and deduction of tax at source (TDS) and filing of returns of TDS respectively.
GST Registration: GST registration is mandatory if aggregate turnover in a financial year exceeds Rs. 20 lakhs or 40 lakhs in case of a supplier who is engaged exclusively in the supply of goods or 20 lakhs for special category states.
Udyam Registration: Udyam or MSME or Udyog Aadhaar registration can be obtained in the name of the business using Aadhar number of anyone Partner to establish that business is registered under the Ministry of Micro, Small and Medium Enterprises.
FSSAI Registration: In case the firm is going to operate any business in which FSSAI registration is required then the firm must obtain FSSAI registration from the Food Safety and Standard Authority of India.
Shop and Establishment Registration: The firm is compulsorily required to register his business under the Shop and Establishment Act of respective State. The Shops & Establishment registration is a state-based, labour license legislation enacted under the respective state in which the shop or establishment has been set-up.
Import Export Code: In case firm thinking to export/import their product then the firm must obtain the Import Export Code (IEC) registration from Director General of Foreign Trade (DGFT).
Trademark: For the protection of Logo / Brand name / Trademark, a partnership firm can register his Logo / Brand name / Trademark under Trademark Act, 1999 by filing a Trademark application to Trademark Authority. After registration of Logo / Brand name / Trademark, we protect our Intellectual Property Rights so that no other person can use/copy it.

Partnership Registration Process

Registering a firm under the Partnership Act is not mandatory as in the case of setting up a firm. It is always advisable to get your firm registered at Registrar of Firms of the Town/City where you are planning to set up the business. This ensures that you get legal proof of the firm's existence. Apart from that, the Act provides various benefits and rights to every partner - filing a suit in case of disputes, settling claims against third/external parties, etc. In case of any disputes, a court of law would first check the terms and conditions under which the partnership was formed. Registration of Partnership Deed would be valid evidence for that.

Documents required for making an application for registration of Partnership

a. Attested Partnership Deed
b. Identity proof of partners - PAN Card, Voters' ID card, Passport, etc.
c. Address proof of partners - Electricity bills, Voter Card, Aadhaar Card, Passport, etc.
d. Address Proof of your firm, e.g. - Current account details or any other license applied in the name of your firm or rent agreement (Rented Property).
>e. Stamp Duty of appropriate value (Through Stamp papers)
f. Photographs of all partners

Compliance required by a Partnership firm

GST Return: Every registered person shall furnish the details of outward supplies and inward supplies of goods or services or both during a tax period on or before the due date as specified by the government on the common portal.

Accounting: Every partnership firm shall prepare and maintain proper books of accounts and other relevant books and papers. Accounting is necessary for the Partners capital, Partners profit or loss, GST Return, Income Tax Return, Tax Audit, GST annual return, GST audit, receivable or payable from customer or supplier respectively, etc.

Income Tax Return: Income Tax Return is the form in which assessee files information about his Income, expenses, deduction, capital contribution, profit sharing ratio, partners remuneration or other information and tax thereon to Income Tax Department. Partnership firm file income tax return of every financial year on or before the due date in forms ITR 5.

Income Tax Audit:

A person carrying on business, if his total sales, turnover or gross receipts in business for the year exceeds Rs. 1 crore. This provision is? not applicable to the person, who opts for presumptive taxation scheme under section 44AD and his total sales or turnover doesn't exceed Rs. 2 crores.

Note: w.e.f. Assessment Year 2020-21, the threshold limit, for a person carrying on business, is increased from Rs. 1 Crore to Rs. 5 Crore in the case when cash receipt and payment made during the year does not exceed 5% of total receipt or payment. In other words, more than 95% of the business transactions should be done through banking channels.

A person carrying on profession, if his gross receipts in profession for the year exceed Rs. 50 lakhs.

The tax audit reports conducted by a registered chartered accountant are to be presented in a prescribed format. Under section 44AB of the IT Act, the form that is prescribed for the audit report is Form No. 3CB and the prescribed particulars are to be reported in Form No. 3CD.