Stride Post Latest News
Related Articles
Evrything you need to know about partnership firm in indain, as Many students and graduates dream of running a company, but what is stopping them from taking this lucrative and extremely sensible career? Could it be a lack of clarity on the larger picture of how a law firm should be created? This is not enough to deter you from going after your goal.
Follow this article as it will guide you through the procedure of registration of your law firm in accordance with the Partnership Act.
Meaning of partnership firm
Individuals who have entered into a partnership with one another are known as Partners individually and collectively as ‘A firm.’ The name under which their business operates is known as the firm’s name.
When does a partnership firm get registered?
The Partnership registration is the sole decision of the members. It is not required to register a partnership. Partnership Act does not demand registration as a compulsory procedure, but it is advised to register the business according to the act because it confers the business with other advantages that convey an implicit message that the act favors registered companies over unregistered ones. Only registered companies are considered to be legally operating.
The firm can be registered at any point prior to the beginning or even during the duration of the partnership. However, suppose a business would like to defend a legal claim from any legal document by filing a lawsuit. In that case, it must be able to do this only after the partnership deed registration has been executed.
Another scenario where the registration of the company becomes mandatory is when the company wants to establish a new type of organization, such as an LLP or company, in a more easy manner.
The firm is registered once the registrar of companies is satisfied that the firm is in compliance with section 58 of the partnership act.
It is important to remember that registration at the income tax department remains mandatory for both registered and unregistered companies by the registrar.
Registration proof
The certified copies of the entry pertaining to the firm’s name within the Register of Firms is conclusive evidence of the registration of the company.
Any statement, notification, or announcement recorded or noted in the registrar of companies is conclusive evidence of any fact stated.
| 10 personality traits you should look in Defense lawyer
Business name of the partnership firm
- The name of the partnership firm must not be the same or similar to other firms operating with the same type of business.
- The partnership company name could contain the member’s name listed in the members’ register.
- The name of partnership firms must be in line with the provisions of the Names and Emblems (Prevention of Unlawful use) Act of 1950.
- A partnership’s name can include suffixes like “and Company,” “and Co.” or “and Associates.”
- The companies are prohibited from using words that suggest patronization or support for the business.
- A partnership firm name can be used with the suffix “and/&” to distinguish the principal name/center name/surname of the accomplice of the business.
Every business has to adhere to the above guidelines while deciding the name of the company.
After the business name is chosen, register for the trademark to prevent other businesses from misleading the public about the same name. It can also provide additional legal security.
Advantages of registration
Benefits to Partners
Each partner in the firm may sue another partner, former partner, or the company if they have a disagreement arising from the partnership deed, a contract, or any other right arising from the partnership act. However, partners cannot use these powers if the company isn’t registered.
If partners are planning to sue any third party for exercising any rights arising from the contract or other legal document, it is required that the firm is registered and that the person who files suit must be a member whose name is recorded in the register of firms. This is not the case for third parties seeking to sue a business.
Benefits to Creditors
A creditor may, on demand, ask any partner to pay back the company’s debts. Every partner’s names on the deed have the same obligation to pay the debt to a third party. This allows creditors to collect the money owed from the company.
As creditors get these benefits from a registered company, the company’s trustworthiness is greatly enhanced. While registered and nonregistered companies are legitimate under the law, lenders prefer to make loans to such types of businesses.
Benefits to the work
The partnership comes with distinct advantages and disadvantages. When a firm believes that the drawbacks of the partnership arrangement are more significant than the benefits, it will tend to choose an alternative form of structure. This process should be followed only when the company is registered as a business.
A registered business can be eligible for tax advantages in accordance with the Income Tax Act, which can help save a lot of bucks that could otherwise be used to expand the business.
Benefits for a new partner
The new partner must be able to enforce his dues against existing partners in case of default. The dues will not be enforced against existing partners if there isn’t a registered company.
This also increases confidence in the company to others. Credibility is extremely important to the business since the new partner doesn’t just share profits but also adds capital to the business.
Partnerships and challenges
1. Problems with Partners
A partnership business is characterized by a great deal of human interaction as well as co-partners. Human relationships are complicated and can cause a lot of friction. This human interaction is more complicated than any other form of business model.
It isn’t easy to exit from a partnership because the transfer of the partnership share of the member is contingent upon the agreement of the other partners. After the approval of other partners, the current partners can transfer their shares to another.
2. Raising Capital
Partners’ biggest challenge is the limitation on the capital that can be pooled. The company can only raise capital from a certain number of partners. If the need arises, new partners have to be invited, but it’s not an easy task because a company’s reputation and credibility have to be good.
3. Your stake is protected in the Partnership firm
The risk of personnel profit is present even in the partnership form of business. A partner in the firm can make decisions on behalf of the other partners. Any decisions made always carry the risk of personnel profiting that may impact the company’s interest.
4. Public faith
The public’s trust in this kind of business model was not very positive because of the issues mentioned above. But this can be overcome with the right steps.
The essentials of Partnership firm
1. Contractual Relationship
A partnership company operates by virtue of a valid and voluntary contractual partnership between partners.
The contractual relationship will be either written or oral. Sometimes, there is no need for either of the two; a mutual understanding is sufficient to establish the relationship.
2. Two or more people
The Partnership Act requires a mutual agency between two or more people. There must be more than one person who is competent enough to sign an agreement to establish a partnership firm.
It is the minimum number of partners required to form the partnership company. There is a limit on the maximum number of partners who can sign an agreement under the Companies Act.
3. Mutual Agency
A partnership can be described as a collective agency wherein the partners can carry out the business, or one acts for all of them as an agent. One partner acts as a principal, and all other partners are agents.
