Partnership, in a layman language, refers to the coming together of two or more people to carry out a certain task. In the corporate structure of India, the Indian Partnership Act (1932) (referred to as Act hereafter), defines partnership as “the relation between two or more persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”
A partnership is governed by a partnership deed, which must be a written document duly signed by all the partners. The deed fulfills the requirement of dissipating information about the firm – name, partners’ details, nature of the business, the location of the business and others. Without much hassle to accumulate a minimum capital, two or more people can start a partnership firm, as there is no minimum capital requirement under the Act.
ADVANTAGES OF PARTNERSHIP FIRM:
£ Right to sue the firm or partner in case of disputes,
£ Right to sue the third party,
£ Can claim a set-off in dispute with third party.
A partnership firm is one of the most preferred forms of starting a business in India because of its simplicity. Above benefits are not effective in case of Non-Registration under the Partnership Act.
LEGAL & ANNUAL COMPLIANCES FOR PARTNERSHIP:
£ It is necessary for the partnership firm to obtain Permanent Account Number (PAN) and Tax Deduction Account Number from the Income Tax Department,
£ A Partnership firm needs to file ITR irrespective of the revenue or loss. For partnership firm, the rate of income tax on the whole of the total income will be 30% surcharge on income tax.
£ Partnership Firms having an annual turnover of over ₹100 lakhs are required to obtain a tax audit.
£ GST registration is required for businesses whose annual turnover exceeds ₹40 lakhs (₹20 lakhs for North Eastern states). For some businesses like Export-Import, E-commerce, and Market Place Aggregator, GST Registration is mandatory.
£ After GST registration firms have to file monthly, quarterly and annual GST returns.
£ Partnership firms are also required to file quarterly TDS returns that have TAN and are required to deduct tax at source as per TDS rules.
£ For all the partnership firms having registration with ESI, it is mandatory for them to file ESI return.