16 April 2010

Formation of Partnership Firm

Under India Partnership Act, 1932 (As against Limited Liability Partnership Act, 2008).
A partnership is a type of Business Entity  in which persons (partners/owners) agree to share with each other the profits or losses of the business carried on by all or any one of them on acting of all. The person who enter in partnership are called known as partners. The business entity is collectively know as firm and the name in which business is carried is known as firm.
Thus basic essential for formation of partnership is i) agreement, ii) business and iii) sharing of profit and loss.
Agreement of partnership or Deed of partnership is a document signed by partners containing details of partnership such as:
1. Date of Partnership,
2. Names of Partnership,
3. Firm Name and Address,
4. Business to be carried by the firm,
5. Duration of the firm,
6. Dissolution of the firm
7.Details of allocation of Profit and Loss amongst the partners,
8.Rights and Duties of Partners,
9.Details of contribution by partners and property of the firm,
10. Application of property of the firm,
11. Terms and conditions for admission of new partners, retirement of existing partners, expulsion of the partner, death of partner, insolvency of partner,
12. Reference of dispute to arbitration,
and any other terms or conditions agreed between the partners.
The law relating to partnership in India is governed by India Partnership Act, 1932. The Indian Partnership Act, 1932 is applicable to whole of India except the state of Jammu and Kashmir;  The act is but;  administrated by the State Government. State Governments have made rules for administration of the act and registration of firm under Indian Partnership Act.
In Maharashtra the Partnership is registered with Registrar of Firms, Maharashtra State. The application is to be accompanied along with the filing fees and must be made in prescribed form.
Before registration with registrar, the Deed of Partnership is to be executed on stamp paper of appropriate amount or stamp duty is to be paid as per provisions of Bombay Stamp Act.
The Stamp Duty is payable as per capital contribution made by the partners detailed as under:
Capital Contribution by the Partner Stamp Duty Payable
Less the Rs.50,000/- Rs.500/-
For every additional Rs.50,000/- or part thereof Rs.500/-
Maximum Stamp Duty Rs.5,000/-
For Capital Introduced as Immovable Property Stamp Duty as on conveyance on market value of the property
Dissolution Deed Where property is transferred to the partner other then the one who brought it in. Stamp Duty as on conveyance on market value of the property
In any other case Rs.200/-

Procedure of application for registration with Registrar of Firms
Registration of firm is not compulsory under Indian Partnership Firm, however unregistered firm faces various incapacities in court of law. No suit to enforce a right arising from a contract or conferred by this partnership act can be instituted in the court by any person suing as the partner of the firm against the firm or any person alleged as the partner of the firm until the firm is registered. The firm can also not enforce any rights arising from the contract against the third party unless the firm is sued. Indirectly registration of firm is a must. The firm can however be registered before filing the suit, by payment late filing penalty to the Registrar of Firms.
The following are required for registration with the Registrar of Firms, Maharasthra.
1. Copy of Partnership deed,
2. Translation of partnership deed in Marathi,
3. Application Form A duly notarised,
4. Self Addressed Postage Paid Envelope,
5. Stamp paper of Rs.100/-
The partnership can be registration within one year of its formation along with the filing fees of Rs.750/-. The firm can be registered after 1 year by paying the late fee of Rs.100/- per year or part thereof.

Partnership, Stamp Duty Payable in Maharashtra