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The Partnership is an aspect of ‘right of association’ guaranteed under Article 19(1)(c) of the Constitution of India, 1950. When sole proprietorship proved unsatisfactory to ever-expanding business a kind of stimulation was given to associations among individuals in the form of Partnerships. The partnership is the most popular form of business organization, which is a logical extension and an improvement over the sole proprietorship.
A partnership arises from a contract, and therefore, such a contract is governed not only by the provisions of the Indian Partnership Act, 1932 in that regard but also by the general law of contract in such matters, where the Partnership Act does not specifically make any provision or is silent.
The contract of partnership is a special contract where two or more persons join together to jointly carry on some business activity. They become partners by contributing money, effects, and skill to a lawful business in conduct of each shall not only act for himself but as an agent of all and wherein shares in the profits and losses.
It is a relationship that arises from the partnership agreement and not by status or law of inheritance. The persons who have entered into a partnership with one another are called ‘Partners’ individually and ‘Firm’ collectively.
Being one of the oldest forms of a business relationship, the partnership is still preferred by professionals and small trading and business enterprises in India and abroad but the companies have replaced partnerships in complex businesses.
However, it is the most suitable form of business organization than a company because a company has to go through a lot of procedural formalities and a partnership is created just by an agreement.
Also, for the day-to-day running of the business and maintenance of accounts, a company is subject to a lot of statutory control, whereas the partners are their masters for regulating their affairs.
The procedure for registering a firm has been mentioned under sections 58 and 59 of the Partnership Act, 1932.
This application for registration can be sent to the Registrar of Firms through post or by physical delivery.
3. Certificate of Registration: When the Registrar is satisfied that all the requirements have been complied with and all the documents required are correct and true, he will record an entry of an application in the register called the Register of Firms and file the statement. After recording the statement in the Register of Firms, he issues the certificate of Registration. This amounts to the Registration of Firms.
This Register of Firms must be up-to-date and open to inspection by any person on the payment of the prescribed fees. A person can also have a certified copy of any entry or portions in the Register of Firms after the payment of a prescribed fee.
Following are the documents that are required to be submitted to the Registrar for the registration of partnership firms:
After satisfying the documents, the Registrar will register the partnership firm in the Register of Firms and issue a Certificate of Registration.
After the registration of the firm, there may be a possibility of some changes in the name of the firm, or principal place of the business, or in the name and address of the partners, or closing or opening of branches by the firm, etc. Such alterations may have to be recorded by the Registrar and the following alterations or changes in this connection are:
In this case, the same kind of formalities which are mentioned above have to be taken into the consideration and when the Registrar is satisfied that all the necessary formalities have been complied with, he will amend the entry in the Register of Firms.
An intimation of such change can be made by any partner or an agent of the firm to the Registrar.
If the name or the permanent address of any partner of a registered firm changes, then an intimation of the same shall be given to the Registrar.
Constitution of the firm can be affected by the introduction of a partner to the firm, or when a partner ceases to be a partner by expulsion, retirement, insolvency, or death. However, no fresh registration of the newly constituted firm is required but a public notice is necessary otherwise the liability of the outgoing partner for the act of each other continues to exist.
The Registrar is empowered to correct any mistake which has been made in the Register of Firm while entering the name of the firm for registration and such entry must conform with the documents filed for registration.
Sometimes there may be a mistake in the documents filed with the Registrar or an error in the records of the Registrar. Such mistakes can be rectified by the Registrar through an application made by all the parties who have signed the documents relating to a firm.
The Court deciding any matter relating to a registered firm has been given the power to direct the Registrar to make any amendment in the entry of the Register of Firms which is necessary in the eyes of law.
A partnership firm should be registered at any time after the creation of a partnership. The Partnership Act does not mandate the time limit within which the firm should be registered. Hence, there is no period of limitation either for the original registration of a partnership firm or subsequent changes.
If any legislation by the State Government lays down any time limit for registration of the firm whether original or subsequent, then such will be ultra vires the Partnership Act and will not be applicable.
Though Registration of Partnership Firms is not compulsory in India and thus no penalty is imposed for non-registration. However, consequences or disabilities of non-registration have persuasive pressure for their registration. The following consequences are:
The Registration of a Partnership Firm in India can take up to 12 to 15 working days and is subject to Government processing time which varies from state to state. The incorporation of a partnership firm is much more convenient as compared to other forms of business organizations because the firm can be formed by drafting the partnership, entering into an agreement, and getting it registered though there is no prescribed time limit on the registration of a partnership firm. Also, apart from a partnership deed, no other documents are required for its registration.