what is Partnership firm in India?

A partnership is a business entity having two or more owners. Earnings are distributed according to the partnership agreement and are treated as personal income for tax purposes. Thus, like the sole proprietorship, the partnership is simply conduit for directing income to its partners. Partnership has unique liability situation. Each partner is jointly and severally liable. Thus, a damaged party can pursue single partner or any number of partners- and that claim may or may not be proportional to the invested capital of the partners or the distribution of the earnings. This means that if the one partner did something to damage customer, that customer could sue all the partners even though other partner played  no part in the problem.

Organizing partnership is not as effortless as with sole proprietorship. The partners must determine, and should set down in writing, their agreement on number of issues:

  • The amount and nature of their respective capital contributions (e.g., one partner might contribute cash, another a patent, and a third property and cash)
  • How the business’s profits and losses will be allocated
  • Salaries and draws against profits
  • Management responsibilities
  • The consequences of withdrawal, retirement, disability, or the death of a partner
  • The means of dissolution and liquidation of the partnership

Advantages of a Partnership

Partnerships have many of the same advantages of the sole proprietorship, along with others:

·        Except for the time and the legal cost of crafting a partnership agreement, it is easy to establish.

·        Because there is more than one owner, the entity has more than one pool of capital to tap in financing the business and its operations.

·        Profits from the business flow directly to the partners personal tax returns; they are not subject to a second level of taxation.

·        The entity can draw on the judgment and management of more than one person. In the best cases, the partners will have complementary skills.

                                       

                                   Disadvantages of a Partnership

As mentioned earlier, partners are jointly and severally liable for the actions of the other partners. Thus, one partner can put other partners at risk without their knowledge or consent. Other disadvantages include the following:

·        Profits must be shared among the partners.

·        With two or more partners being privy to decisions, decision making may de slower and more difficult than in a sole proprietorship. Disputes can tie the partnership in knots.

·        As with a sole proprietorship, the cost of some employee benefits may not be deductible from income taxation.

     Depending on the partnership agreement, the partnership may have a limited life. Unless otherwise specified, it will end upon the withdrawal or death of any partner.

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  • anwar ali

    how to registerd a sole-proprietorship firm?

  • anwar ali

    how to registerd a sole-proprietorship firm?

  • http://www.mukeshraj.com/ mukeshrajco

    Mr. Anwar

    I have already explained that there is no need to register a sole proprietorship firm seprately. You have to obtain only VAT/Service tax Registration, if applcable.

    • http://www.b2bsutra.com Prabhat

      Dear Sir,

      I am just planning to launch my website http://www.b2bsutra.com. I want to open a partnership firm along with my wife. Please suggest me the procedures and step by step method of opening a partnership firm. I am situated in Pune- Maharastra.

      • Suresh

        Hi Prabhat,

        Me and my partner has just signed the Partnership Agreement Deed today.. You would like to know more ..plz mail me

  • http://www.mukeshraj.com/ mukeshrajco

    Mr. Anwar

    I have already explained that there is no need to register a sole proprietorship firm seprately. You have to obtain only VAT/Service tax Registration, if applcable.

    • http://www.b2bsutra.com Prabhat

      Dear Sir,

      I am just planning to launch my website http://www.b2bsutra.com. I want to open a partnership firm along with my wife. Please suggest me the procedures and step by step method of opening a partnership firm. I am situated in Pune- Maharastra.

      • Suresh

        Hi Prabhat,

        Me and my partner has just signed the Partnership Agreement Deed today.. You would like to know more ..plz mail me

  • Anthony

    Sir
    I would like to know what is required for a partership business other than a partnership deed. Is is necessary to Register, and lastly is it necessary to obtain VAT / Service Tax and CST numbers.
    As we are going to start a partnership firm in the next week.

    Request you to please guide me in this regard.

    thank & regards
    Anthony

  • Anthony

    Sir
    I would like to know what is required for a partership business other than a partnership deed. Is is necessary to Register, and lastly is it necessary to obtain VAT / Service Tax and CST numbers.
    As we are going to start a partnership firm in the next week.

    Request you to please guide me in this regard.

    thank & regards
    Anthony

  • Prashant Khanna

    Dear Sir

    Pl explain the benifit of opening a partnership firm IN TERMS OF TAX, since my mother and cousin both want to open a firm in partnership.

    Pl give details on TAX liability if opened propertership and if opened partnership @50%.

    Pl assume Same profit in both cases.

    Prashant

  • Prashant Khanna

    Dear Sir

    Pl explain the benifit of opening a partnership firm IN TERMS OF TAX, since my mother and cousin both want to open a firm in partnership.

    Pl give details on TAX liability if opened propertership and if opened partnership @50%.

    Pl assume Same profit in both cases.

    Prashant

  • sangeeta

    can a proprietorship firm be changed to partnership firm

    • Anonymous

      Yes, A proprietorship can be converted into partnership firm

  • sangeeta

    can a proprietorship firm be changed to partnership firm

  • Soumitri

    Dear Sir,

    Would like to be a partner in a Consulting firm. We are only two partners who would like to run this business. I will be the active partner and the other person will be a sleeping partner. Please let me know What are all the documents, registrations required to run the business?

  • Soumitri

    Dear Sir,

    Would like to be a partner in a Consulting firm. We are only two partners who would like to run this business. I will be the active partner and the other person will be a sleeping partner. Please let me know What are all the documents, registrations required to run the business?

  • Shilpi

    Sir,
    I completed CA from India in 2004 & am holding a COP.I am currently living in USA with my husband & am not working here.
    The firm under which I did my articleship in India wants to add me as a partner as one of their partners has resigned.
    I want to know if legally this is fine?
    Also what will be the other issues related to my responsibilities & liabilitis?
    Plese mail me as soon as possible

  • Shilpi

    Sir,
    I completed CA from India in 2004 & am holding a COP.I am currently living in USA with my husband & am not working here.
    The firm under which I did my articleship in India wants to add me as a partner as one of their partners has resigned.
    I want to know if legally this is fine?
    Also what will be the other issues related to my responsibilities & liabilitis?
    Plese mail me as soon as possible

  • http://sac.firm.in SUNITA AGRAWAL

    Dear Shilpi,
    As per my opinion you can become partner in that firm, but you should open a Branch Office , where you are residing, in USA.

    CA. Sunita

  • http://sac.firm.in SUNITA AGRAWAL

    Dear Shilpi,
    As per my opinion you can become partner in that firm, but you should open a Branch Office , where you are residing, in USA.

    CA. Sunita

  • Amar

    Dear Mr. Raj,
    We are 3 partners, interested in setting up a ‘Partnership Firm’ in Mumbai, Maharashtra. Scope of our services would include providing market information and partner selection for overseas clients. Our queries are as follows: a] Is opening a bank account for a partnership as easy as for a Proprietorship; b] Do we need to register our company; c] Are we liable for service tax and d] would a new PAN no be required or one of the 3 partners no. could be used?
    Awaiting your advice.
    Thanx and rgds,
    Amar

  • Amar

    Dear Mr. Raj,
    We are 3 partners, interested in setting up a ‘Partnership Firm’ in Mumbai, Maharashtra. Scope of our services would include providing market information and partner selection for overseas clients. Our queries are as follows: a] Is opening a bank account for a partnership as easy as for a Proprietorship; b] Do we need to register our company; c] Are we liable for service tax and d] would a new PAN no be required or one of the 3 partners no. could be used?
    Awaiting your advice.
    Thanx and rgds,
    Amar

  • Muqaddam sheriff

    Sir,

    I would like know as to how to retain the title/name of the proprietorship without letting any other business man copy the same?

    What are the legal formalities to retain our own business title in sole proprietorship?

    Your quick reply will be appreciated.
    Thanks
    Muqaddam

  • Muqaddam sheriff

    Sir,

    I would like know as to how to retain the title/name of the proprietorship without letting any other business man copy the same?

    What are the legal formalities to retain our own business title in sole proprietorship?

    Your quick reply will be appreciated.
    Thanks
    Muqaddam

  • Rajendra

    Hi,
    We have sign a deed for partnershhip farm among 3 friends.We have got PAn no,Service tax ,looking for VAt.No one of the partner is not interested.What action we should do.Do we required new partnership deed and go for fresh PAN and Service tax .
    Or we can take only resignation of one and submit to PAN and servce tax office.
    Please send me in my mail

  • Rajendra

    Hi,
    We have sign a deed for partnershhip farm among 3 friends.We have got PAn no,Service tax ,looking for VAt.No one of the partner is not interested.What action we should do.Do we required new partnership deed and go for fresh PAN and Service tax .
    Or we can take only resignation of one and submit to PAN and servce tax office.
    Please send me in my mail

  • jisha chetty

    Hello Sir,
    I have just started my business in the month of november, i.e. proprietorship firm. If i am making po or invoice do i need to add 4% vat. I am having my own garment manufacturing unit. And do i required to registered my company. how i will get vat and tin number?

    Thnks,
    jisha

    • http://www.mukeshraj.com/ mukeshrajco

      You have to register yourself with State VAT authorities. That’s all.

  • jisha chetty

    Hello Sir,
    I have just started my business in the month of november, i.e. proprietorship firm. If i am making po or invoice do i need to add 4% vat. I am having my own garment manufacturing unit. And do i required to registered my company. how i will get vat and tin number?

    Thnks,
    jisha

    • http://www.mukeshraj.com/ mukeshrajco

      You have to register yourself with State VAT authorities. That’s all.

  • krishanamoorthy

    I am starting a parner ship consultancy firm with another partner. I am allowing the Company to use my residence where I am staying as an office. If I want to sell the house later, will there be any problem. Do I have to mention in the agreement a clause stating that I will be the sole decision maker for the property or Falt and company will have no right. Please advise and suggest a clause which is valid legally.

  • pankaj

    i m going tostart a business in partnership. what word i have to keep after name i.e. xyz………..?
    do i hv to use inc/cor/co.

  • Mohd. Tahir

    we r 2 frnds, want to open a service centre..we’ll make a partnership deed and a pan card of our firm..then we ;ll start our business..
    i dont know what name we can give to our firm
    like enterprises or something else

  • Neeraj

    Dear Sir,

    I intend to open up a engineering services provider and a engineering goods trading firm along with a partner. I would be the active partner among the two. I wish to know, what type of firm should we go ahead with? A firm / a company ? What are the various registrations, we would need to acquire eg. Services registration, CST (Is it applicable) ?
    Thanks a lot

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  • satendra

    Thank you for providing the info . . . can you tell me that a business of a mediator can register under which type of firm . . .?

    • Anonymous

      For business of mediator you can register any form of business i.e. Sole prop., firm or Company.
      Sole Prop is simplest, easiest and least costly form of business. So initially go for Sole Prop.

      Mukesh

  • Mani

    Partnership Farm Company or Non-Company?

  • Harivapi

    We have sign a deed for partnershhip farm among 3 friends.We have got PAn no,Service tax ,looking for VAt.No one of the partner is not interested.What action we should do.Do we required new partnership deed and go for fresh PAN and Service tax .
    Or we can take only resignation of one and submit to PAN and servce tax office.

    • Anonymous

      There is no need to dissolve the partnership firm. Just take resignation from unwilling partner and prepare a new deed. You have no need to intimate to PAN authority but inform to service tax department within 30 days of changes.

      Mukesh Goel

  • Nagesh Ghatkar

    We like to start the SSI unit under partnership firm so we want the proper information about the registration, documentation, required other process.

  • Dileep

    Dear sir,

    I would like to know if a Private Ltd company and another partnership firm can jointly start a partnership business (for eg; a jointly operated dealership)  with out starting another firm… Pls help!

  • rizwan

    hi sir, we are a nelw formed partnershi firm is it complsry to pay TA DA and PF to employee

    • Anonymous

      TA/DA is not mandatory to any employer. PF ia applicable when you have more than 20 employees or as per applicable PF rules.

      Mukesh

  • Inquisitive

    Do i need to register a partnership, in order to open a bank account in the name of the firm?

  • Ranjithkumar_grnk

    Dear Sir,

                  I have 5 partnership in my hotel businees, and one of the partner we are appointed in MD of the Hotel. He is not sharing profits of the business. and not allowing the other partners in this business. what are procedure to change the MD of the Hotel

    • mukeshraj

      It’s depends upon the partnership deed amongst the partners. Normally if majority of partners wants to changer the managing partner then convene a meeting and change the managing partner.

  • rcg

    Hi:

    Please let me know if a partnership firm (2 partners) can receive shares from another unlisted firm abroad for services provided to the other company. I ask this because my understanding is that partnership firm is not a legal entity. 

  • Aaaa

    Can huf firm join as partner in partnership firm…also confirm if demat account needs to be open in in the name of HUF partner..same can be accepted. 

    • mukeshraj

      Yes, HUF can become a prtner in Partnership firm. and HUF can open a separate dmat account also.

      Mukesh Goel

  • rajnikant

    helped me in my project immensely dhanyawad