Registration of a Firm

Partnership is the result of an agreement between persons (minimum 2 maximum 20) who agree to carry on a lawful business with the object of earning profit. The name of the firm under which the business is carried on may be recorded with the Registrar of Partnership Firms, The registration is the evidence Of the existence of the firm.

Is Registration of a Partnership Compulsory?

The Partnership Act of 1932 does not make compulsory for the firms to be registered w)th the Registrar of Partnership Firms. In order to encourage the business, the registration of the firms is left entirely to the willingness of the partners of the firms. However, if a firm wants to avail of the benefits of registration, it can do so by filing a statement on the prescribed form and depositing the required registration fee.

The whole process & registration is divided in two parts: (a) Submission of a statement. (b) Certification.

The application for registration of the firm is submitted to the Registrar of Partnership Firms on a prescribed printed form. The statement is to be signed by all the partners. It contains following particular about the firm:

On receipt of the application for registration, the Registrar examines the particulars given in the statement. If the Registrar is satisfied with the information supplied, the Registrar records the name of the firm in a register called the Register of Firms. The certificate of registration is issued to the partners.

If at any time, a firm wishes to change the name or place or wants. to close the branches, or a change takes place in the constitution of a registered firm, the registrar after-being satisfied, will make the necessary changes in the record according to the revised statement.

If any mistake in the document duly corrected and signed by all the partners is brought to the notice of the Registrar of Firms, the Registrar will rectify such mistake in the documents.

The terms of agreement are made clear to each partner in writing which are mostly drawn by an expert lawyer.

If an issue arises among the partners in the form of statement, it becomes a basic legal document for decision.

If a firm is registered with income tax authority also, the profit of the firm is divided among the partners. The taxis charged on the income of the partners individually. In case of unregistered firm, it is the firm which pays the tax. The partners of the registered firm, therefore, get the privilege of lower assessment.

A registered partnership can file suits against the outsiders. If can also file suits against the partner.

A retiring partner is not held liable for the debts of the firm after the date of his retirement. The notice of re is filed with the Registrar. This notice is considered a valid evidence of his retirement.

A new or incoming partner get compete information of the registered firm from the Registrar’s office. He can decide properly whether to join the firm as partner or not.

The partner of a registered firm cannot deny from the membership by the firm. The creditors of the firm, thus, can hold one or all the partners liable for the payment of the debts.

The Section 69 of the Partnership Act imposes certain disadvantages on unregistered firm and its partners. It thus brings indirect pressure on them to get themselves registered. The main disabilities which are attached to the unregistered firms and partners are as under:-

A partner of an unregistered firm cannot tile a suit against firm or any other partner for enforcing any legal commitments through the court.

An unregistered firm cannot take any legal action against third parties for the recovery of its clues.

Third party can, however, file a suit against the firm for the recovery of dues even if the firm is unregistered.