Partnership is a form of business where more than one individual is a shareholder. They share management as well as profits and loss. It doesn’t enjoy limited liability.
There are two modes of partnership: general and limited partnership. In general partnership, the partners are responsible for the capital investment, managerial functions and sharing of profits or losses. In a limited partnership business, there are features of general partnership as well as limited. This means that in limited partnership there is a partner who has limited work, i.e. he only acts as an investor and does not take part in managerial functions.
Features of Partnership
- Not a separate legal entity
- Unlimited liability
- Minimum 2 and maximum 50 individuals can make a partnership
- Partners are mutual agents
- Oral or written agreement
- A partnership deed has to be made and maintained
Advantages of Partnership
- Easy to setup
- Pooling in of skill as different partners have different skills
- Greater capital capacity
- More brains to think
- Division of work makes work quick and easy
- More loan taking capacity
- Flexible legal structure
- Tax savings
- No need for yearly return filling
A partnership deed contains
- Name of partners, all parties
- Start date of the partnership
- Duration of the partnership
- Type of business
- Name of firm
- Initial capital investment
- Profit/loss sharing ratio
- Steps to be taken in the winding up of the business
- Steps to be taken at the death of a partner
- Division of property after winding up of business
- Role of each partner
- Rights of each partner
- Liabilities of each partner
How to register a partnership?
- Obtain DIN and DSC and DPIN
- Obtain pan/tan
- Drafting of partnership deed
- Registration of partnership deed
- Fill up form 1 (application for reservation of name or change of name)
- Fill up form no 2 (incorporation documents and subscriber’s statement)
- Ownership proof of the office
Documents required for the Partnership registration
- Identity proof of partners
- Address proof of partners
- Specimen of affidavit
- Copy of partnership deed
Types of partners in partnership
- General partner: a general partner is one who provides capital and actively takes part in the management of the business. He/she also shares profits/ losses.
- Limited partner: a partner is said to have limited responsibility when he contributes to the capital only without taking responsibility for any management work. He is exempted from taking all the liability of the company.
- Silent partner: this partner invests in capital for a return but neither takes part in the management nor wants to reveal his association with the firm publicly. Therefore his name is seldom referred to and although a partner, he/she is only concerned with the profit returns.
Cost to register partnership
Registering a partnership company costs depends on the requirement of the client, basically starts from 8,000 to 10,000 INR approximately.
Time to register partnership
It takes from 7 to 14 days to get a partnership firm registered.