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Proprietorship into Partnership

Partnerhsip

Sole Proprietorship is frequently the favored decision of an organization for small businesses. A proprietorship is easy to start and operate. It is also not mandatory to register/enroll in a proprietorship.

 

A sole proprietorship may indeed be ideal for small businesses with limited operations and budgets. It is likewise not hard to manage. However, the simplistic design of the sole proprietorship business also does not allow for higher growth and expansion. It would not be perfect to acquire higher speculation from outsiders since proprietorship is lawfully restricted to one individual There may not be limitations in appointing representatives/outsiders as employees, but on another hand, there is less accountability than co-ownership alone can provide. Thus in a proprietor firm, there is a lack of fresh ideas, approach, and capital by changing the type of business into a partnership

A Partnership firm would be incorporated under the Partnership Act, 1932. It begins with an agreement called a partnership deed signed between two or more partners.

The benefit of partnership business

Fewer compliances and less formal

This is the main advantage of a partnership firm as compared to the LLP & company lesser compliance and maintenance of complicated records of the business.

Easley start of business

A business will easily start in partnership mode less required of any professional expert for commencement of business.

Share of business burden

As compared to a sole proprietor, business complication, support received from partner easily and done business stress-free.

Easley available of knowledge and skills

Each partner has their own knowledge, skills, experience, and a business contract. They can share the task and enjoy their specialization.

Better decision making

In partnership, a unique business perspective brought by each partner and which one is better one will decide after a healthy debate that situation is far better than the sole proprietor

Disadvantages of partnership business

Legal status: In a partnership business, there is no legal existence distinct from the partner. It will automatically dissolve if a partner is less than two.

Unlimited liabilities: because business have no separate legal status, so partners are liable towards the debts of the partnership firm. If the business is running an uncritical situation then the creditor has the right to seize the partner’s personal assets.

Capital raising issue: unlike partnership firm can raise capital contribution from a partner but it is still finding more difficult to raise capital than a company

Business expansion: as partnership firm is getting difficult for capital raising the same issue are developing in business expansion without fund.

Legal Requirement

Following document required for incorporating of partnership firm

  1. KYC of proposed partner, Like PAN, Aadhar card, and other necessary documents.
  2. Partnership Deed.
  3. After registration of the partnership deed, we can Apply for PAN, GST & bank accounts of the firm.

All about Partnership

OVERVIEW

Sole Proprietorship is frequently the favored decision of an organization for small businesses. A proprietorship is easy to start and operate. It is also not mandatory to register/enroll in a proprietorship.

A sole proprietorship may indeed be ideal for small businesses with limited operations and budgets. It is likewise not hard to manage. However, the simplistic design of the sole proprietorship business also does not allow for higher growth and expansion. It would not be perfect to acquire higher speculation from outsiders since proprietorship is lawfully restricted to one individual There may not be limitations in appointing representatives/outsiders as employees, but on another hand, there is less accountability than co-ownership alone can provide. Thus in a proprietor firm, there is a lack of fresh ideas, approach, and capital by changing the type of business into a partnership

A Partnership firm would be incorporated under the Partnership Act, 1932. It begins with an agreement called a partnership deed signed between two or more partners.

 

Procedure for Conversion Of Proprietorship Into A Partnership

Partnership Deed

So first step is drafting the Partnership Deed. The most important point should be mention in the partnership deed about the conversion of the sole proprietorship into a partnership by adding more partners and bringing in investment. In partnership deed, some points must be considered about the partner capital invested by each partner, salaries and shares in profits to be paid to partners, rate of interest on the capital, profit-sharing mechanism, and responsibilities in case of losses.

 

The deed shall mention the proposed date for starting the operations of the partnership and clause of introduction, resignation, death, of the new partners and other changes in the registered address of the business, partner person details if any ought to be recorded.

 

Registration

Registration of a Partnership is not an obligatory procedure. However, it is recommended because of the enhanced legal protection it offers. After registration of a partnership firm, it will help the firm to file a lawsuit against third parties in dispute. The rights of the partners also would be safeguarded better by empowering suits against any partner who acts against the interests of the firm.

 

The partnership can be signed by every partner on stamp paper and registered at the registrar of firms. Form A under the Partnership Act, 1932, should be filed with the Registrar of Firm. In form A mention all the details about the partnership registration.

 

This brings an end to the sole proprietorship and the partnership deed comes into effect either from the date of registration or from a date from which the partnership will commence as mentioned in the partnership deed.

 

Other Formalities

 

If your sole proprietorship is licensed under Sales Tax, Service Tax laws, forms need to be submitted to the concerned departments for a change of status of your business. PAN number has to be obtained from the Income Tax Department separately since a new type of entity would require a new category of PAN.

 

Register Your Partnership Through https://taxmetrica.com

 

 

The benefit of partnership business

Fewer compliances and less formal

This is the main advantage of a partnership firm as compared to the LLP & company lesser compliance and maintenance of complicated records of the business.

Easley start of business

A business will easily start in partnership mode less required of any professional expert for commencement of business.

Share of business burden

As compared to a sole proprietor, business complication, support received from partner easily and done business stress-free.

Easley available of knowledge and skills

Each partner has their own knowledge, skills, experience, and a business contract. They can share the task and enjoy their specialization.

Better decision making

In partnership, a unique business perspective brought by each partner and which one is better one will decide after a healthy debate that situation is far better than the sole proprietor

Disadvantages of partnership business

Legal status: In a partnership business, there is no legal existence distinct from the partner. It will automatically dissolve if a partner is less than two.

Unlimited liabilities: because business have no separate legal status, so partners are liable towards the debts of the partnership firm. If the business is running an uncritical situation then the creditor has the right to seize the partner’s personal assets.

Capital raising issue: unlike partnership firm can raise capital contribution from a partner but it is still finding more difficult to raise capital than a company

Business expansion: as partnership firm is getting difficult for capital raising the same issue are developing in business expansion without fund.

 

Legal Requirement

Following document required for incorporating of partnership firm

  1. KYC of proposed partner, Like PAN, Aadhar card, and other necessary documents.
  2. Partnership Deed.
  3. After registration of the partnership deed, we can Apply for PAN, GST & bank accounts of the firm.

Basic

INR 1,500/-

One Time Fee

  • GST Registration
  • MSME Registration
  • Bank A/c.

Service Provide Within 7 Days

Standard

INR 11,999/-

One Time Fee

  • GST Registration
  • Shop & Establishment Registration
  • MSME Registration
  • Trade Mark Registration
  • Logo Design
  • Opening Bank A/c.

Service Provide Within 15 Days

Premium

INR 11,999/-

Yearly Fee

  • Yearly GST Compliances
  • Income Tax Return

Services Provided Before the Due Date

Frequently Asked Questions

It is not mandatory but highly recommended. If it is not registered, the firm cannot file a suit against any partner or third party. The partners also cannot sue the partnership firm for his/her claim. However, third parties can sue the firm to enforce their dues or claims. Due to non-registration, the rights of parties are not affected. Also, the partnership can be registered at any time after the formation to remove said effects.

In a proprietorship firm, there is no legal distinction between you and the business; leaving you personally liable for any debts or obligations the business may incur. Also, there are no limitations and no protection for your personal assets. In case of partnership firm, it is divided amongst the partners.

The application for Partnership Firm Registration in India is submitted with the Registrar of Firms (ROF) under whose jurisdiction the Place of Business of Partnership Firm falls. The application of Registration is made in required form along with submitting the Partnership Deed. At the end of the registration procedure, the Certificate of Registration is issued by respective ROF. The process and time of registration may differ for each ROF.

A partner can nominate a successor to take his/her place in the event of death or retirement of the partner. The mode of introducing a new partner or successor is based on provisions in the partnership deed. A new partnership deed is required once the new partner is admitted into the firm.

In case of conversion, existing firm should cease to be a taxable person. There should not be any activity in converted proprietorship after transfer of stock into a new entity. In case, there are unutilized input tax credits lying at the time of such conversion, these credits are allowed to transfer into a new entity.

For confirming the validity of a partnership deed, the partners must pay stamp duty required as per the capital of the firm. The amount of stamp duty payable depends on the amount of capital contribution by partners. The rate of duty is prescribed under the State Stamp Act that differs for every State. Amount of ₹ 500 is included in our package.

The partnership firm shall also have to apply for registration under other statutes such as GST, Shop and Establishments Act and the likes; depending on the nature of the business. In case the sole proprietorship firm owns a trademark, the change regarding the inclusion of partner needs to be added in the trademark registry