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 aconduit for directing income to its partners.Partnership has aunique liability situation. Each partner is jointly and severally liable. Thus, a damaged party can pursue a
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 acustomer, that customer could sue all the partners even though other partner played no part in the problem.
Organizing apartnership is not as effortless as with asole proprietorship. The partners must determine, and should set down in writing, their agreement on anumber 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.
how to registerd a sole-proprietorship firm?
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.
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.
Hi Prabhat,
Me and my partner has just signed the Partnership Agreement Deed today.. You would like to know more ..plz mail me
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
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
can a proprietorship firm be changed to partnership firm
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?
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
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
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
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
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
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
You have to register yourself with State VAT authorities. That’s all.
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.
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.
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
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