What is a GP?
A General Partnership is a business structure in which two or more individuals manage and operate a business in accordance with the Partnership Deed. While the Limited Liability Partnership (LLP) was supposed to be an improvement on the GP structure because its partners have unlimited liability, which means they are personally liable for the debts of the business, the low costs, ease of setting up and minimal compliance requirements make it a sensible option for some, such as businesses that are unlikely to take on any debt. Registration is optional for General Partnerships.
Why should I register as a General Partnership?
- There are very minimum compliance requirements that General Partnerships have to deal with, for example, there is no need for an auditor to be appointed or, if the company is still in the process of registration or incase unregistered, annual accounts filing with the registrar is not necessary either. When compared to LLP, annual compliances are also fewer.
- Taxes depending on turnover, service and sales tax also need not be filed in General Partnerships.
- The ease of beginning. General Partnerships can begin simply with an unregistered deed of the partnership within 2-4 business days. However, having registration for the same has its own perks and advantages. The primary advantage for having a registered firm is that it will allow you to book lawsuits in courtrooms opposing another business or the business associates in the firm for the administration of rights addressed in the Partnership Act.
- Lower costs of setting up. In comparison to LLP, a General Partnership is much cheaper to begin. For example, there is no need for an auditor.
How do I register as a General Partnership?
Detailed below are the steps to register for a General Partnership –
- Step 1:Choosing a name for the partnership that is not too similar to any other registered business names. The name cannot include words such as “Crown” or “Empire,” or any words that imply direct approval, sanction, or patronage by the government. Check for the availability of the name and other trademarks if required against the MCA database to make sure it isn’t already taken by another company.
Tip: Once you’ve chosen your partnership name, register the trademark for additional legal protection. This will keep others from misleading the public with a name similar to yours.
- Step 2:Draft a basic partnership deed. The partnership deed describes your business and lists the rights and duties of each of the partners in your partnership firm. At a minimum, your partnership deed must include:
The name and address of the firm
The names and address of the partners
The nature of your business
The duration of your partnership
The capital contribution of each partner
The profit-sharing ratio among the partners
- Step 3: Adding necessary details to the partnership deed depending on the needs or desires of the partners. Additional clauses typically cover hypothetical circumstances that may arise over the course of the partnership and provide a process for dissolving the partnership. For example the procedures for admitting or introducing a new partner, interest on partners’ capital contributions, salaries or commissions payable to partners, division of powers and responsibility among the partners, audit procedures, procedures in the event of the retirement or death of a partner
- Step 4: Finalize the deed. In order to be legal, the partnership deed needs to be printed on stamp paper and signed by each of the partners. The partners’ signatures should be signed in front of a notary.
- Step 5: Apply for a PAN card for the partnership firm. Even though the partnership firm is not distinct from the partners for tax purposes, you still must get a PAN in the name of the partnership. You are required to pay taxes for the partnership under this PAN regardless of whether you register your partnership.
Proofs required for General Partnership registration
- Documents Required for Partnership Registration
- Form No. 1 (Application for registration under Partnership Act) Original copy of Partnership Deed, signed by all partners
- Affidavit declaring intention to become partner
- Rental or lease agreement of the property/campus on which the business is set.