Parntership

What is Partnership ?

Partnership is a type of business structure in which two or more people come together to jointly operate and manage a business for the purpose of making a profit. In a partnership, each partner contributes resources such as capital, labor, and expertise to the business and shares in the profits and losses according to the terms of the partnership agreement.

Partnership Act, 1932 defines the structure of a Partnership firm by providing all the necessary provisions to run the same. Further, the business operations, share of profits or loss and investments are primarily directed by the Partnership Deed entered while Partnership Firm registration or any changes thereafter. The Act provides different types of partnership firms and its partners that we are discussing here to understand how you can structure your partnership firm while its registration.

Type of Partnership in india

The most used partnership types are listed here with their distinct features to allow you choosing the suitable type.

1.General Partnership:

In this type of partnership, each partner has right to take decision about the working and management of the firm. Downside being that the partner’s liability is unlimited and in case of a financial error / loss incurred by the act of a single partner the personal assets of all the partners can be taken away to pay back the debts and creditors’ claims.

General partnership is further bifurcated into two categories:

a. Partnership at will:

Usually when a partnership is created, it is upon the partners to decide till when they want the partnership to exist. Hence, whenever a partnership is created without a specific time limit of its closure, its termed as partnership at will. The dissolution of partnership is the matter of mutual consideration when need arises and is not pre-decided. It is upon the partners to decide mutually till what period of time they want the partnership to be functioning.

b. Particular partnerships:

This is the type of partnership that is created with an aim to carry out a specific undertaking. When partnership is created for a project of a temporary contract-based work or a specific business only, they are termed as particular partnerships. Once the objective of the business is achieved or the act for which the partnership was created in fulfilled, the partnership will be dissolved. However, the partners have the discretion to come to an agreement in case they wish to continue the said partnership. But in the absence of this, the partnership ends when the task is complete. For example, a partnership for the construction of a building or partnership for producing a movie.

2.Limited Liabilty Partnership (LLP)

A Limited Liability Partnership (LLP) is a type of partnership in which all partners have limited liability for the debts and obligations of the business. This means that each partner is only responsible for their own actions and those of any employees they supervise, and they are not personally liable for the business’s debts or any wrongdoing committed by other partners.

In an LLP, each partner contributes capital, and profits and losses are shared according to the terms of the partnership agreement. Unlike a general partnership, an LLP is a separate legal entity, and each partner has the right to manage the business directly.

The process of forming an LLP involves registering the partnership with the Ministry of Corporate Affairs in India. To form an LLP, there must be at least two partners, and there is no limit on the maximum number of partners. An LLP must have at least two designated partners, and at least one of them must be a resident of India. The designated partners have additional responsibilities such as maintaining compliance with the law, maintaining the books of accounts, and filing annual returns with the Registrar of Companies.

Benefits of forming an LLP in india

Some benefits of forming an LLP in India include:

Limited Liability: Partners are not personally liable for the debts and obligations of the business.
Separate Legal Entity: An LLP is a separate legal entity, which means it can enter into contracts, hold property, and sue or be sued in its own name.
Flexibility: LLPs provide flexibility in terms of management structure and tax planning.
Perpetual Succession: The existence of an LLP is not affected by the death or retirement of any of its partners, and it can continue to exist and carry on business.
Easy to Incorporate: The process of forming an LLP is relatively simple and less time-consuming than incorporating a company.

It’s important to note that LLPs have their own legal and financial requirements and may not be suitable for all types of businesses. It’s always advisable to consult with a legal or financial professional before deciding to form an LLP.

Based on partnership registration status

Based on partnership registration status in India, there are two main types of partnerships: registered and unregistered.

Unregistered Partnership: An unregistered partnership is one that is not registered with the Registrar of Firms. Unregistered partnerships are still valid and legal, but they do not have the same legal recognition and protection as registered partnerships. In an unregistered partnership, the partnership deed is not submitted to the Registrar of Firms, and the partnership is not considered a separate legal entity. The partners in an unregistered partnership share profits and losses according to the terms of their partnership agreement.

Registered Partnership: A registered partnership is one that is registered with the Registrar of Firms under the Indian Partnership Act, 1932. To register a partnership, the partners must prepare and sign a partnership deed, which outlines the terms and conditions of the partnership, such as the name of the partnership, the nature of the business, the capital contribution of each partner, and the profit-sharing ratio. The partnership deed is then submitted to the Registrar of Firms along with the required fee and documents. Once registered, the partnership is recognized as a legal entity, and the partners have legal rights and responsibilities.

Singh Associates is a professional firm that provides services for partnership firm registration in Madhya Pradesh, India. We offer our clients expert guidance and assistance in every step of the registration process at a low cost. Our team of experienced professionals can help entrepreneurs prepare and file the necessary documents for partnership firm registration, including the partnership deed and other legal documents required by the Registrar of Firms. We also provide consultation services to help clients understand the legal and procedural requirements for partnership firm registration in Madhya Pradesh. At Singh Associates, we prioritize the needs and requirements of our clients and strive to provide them with cost-effective solutions for their partnership firm registration needs.