You may want to start a partnership firm with some of your acquaintance. One may wonder whether to register his partnership firm or not when it is not statutorily compelled. Yes, the registration of Partnership in India is not compulsory under Indian Partnership Act 1932. Yet, the unregistered partnership firms lack certain advantages in its future business course. For example, in the unregistered firm the expenses viz., payment of salary, commission, interest on borrowings or drawings are not considered as allowable expenses for determination of total income for payment of tax. Is that it? No… there are more which is detailed below.
1. Procedure of Registration
Entrepreneurs desirous of setting a partnership firm should apply in the prescribed form (Form No. 1) to be submitted to the Registrar of Firms on their jurisdiction with prescribed fee. The application must be signed by all the partners or their authorised agents.
The application contains the following details:
• Name of the firm
• Place of Business.
• Name and Address details of a Partner
• Date of formation of business
• Date of Joining the Firm.
• Duration of the firm.
The duly filled Form 1 shall be submitted along with the required proof before the Registrar of Firms. The details will be verified and then the register will issue the certificate of registration.
Consequences of Non-Registration:
An unregistered firm cannot file a suit against a third party in its name to enforce its legal rights.
Partners of an unregistered firm cannot file any suit to enforce a right against the firm.
The firm might be disabled from participating certain Tenders or contracts which mandates the registration of the partnership firm.
So, needless to add the registered partnership firms avail vice versa of above limitations. It is further advisable to consult a competent lawyer to proceed with the registration of your firm.
Disclaimer: The above contents are mere information and shall not be considered as legal opinion.
