All the partnership firms are governed by the Indian Partnership Act of 1932. It defines rights, duties, and legal relations of the partners with third parties. It establishes the roles of partners and partnership firms in legal and contractual dealings related to their business.
Partnership firm in India has three important elements - an agreement between two or more people, profit-sharing intent, and joint business operation by one or more person. All these conditions must be met to form a partnership firm.
There are certain conditions that need to be met to be a partner in a partnership firm.
Documentation: Collect all KYC documents of the partners, address proof of the office of firm, and the rental agreement (if required).
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What are the different types of Partnership Firms under the Indian Partnership Act of 1932?
The Indian Partnership Act of 1932 provides for two types of Partnership firms that is: Unregistered Firms: These are formed through partnership deed registration. Registered Firms: These kinds of firms are registered with the Registrar of Firms (ROF) in their respective states.
What are the important details mentioned in a partnership deed?
There is no specific format prescribed by the law for a partnership deed. It can be drafted in any manner and usually includes details, such as the main activities of firm, date of formation, duration, capital and profit-sharing ratios, management, dispute resolution mechanisms, and other relevant terms agreed upon by the partners.
Is filing ITR returns and tax audits mandatory for Partnership firms?
Yes, filing Income Tax Returns (ITR) is mandatory for partnership firms for each financial year. The ITR must be submitted by the prescribed due date by the income tax department. However, annual tax audits are not compulsory for all firms.
Who makes managerial decisions in a partnership firm?
In a partnership firm, the partners themselves are responsible for making all kinds of managerial decisions since there is no distinction between ownership and management.
Can a Partnership Firm be converted into an LLP or Private Limited Company?
Yes, a partnership firm can be converted into a Limited Liability Partnership (LLP) and a Private Limited Company, according to the rules mentioned in the Partnership Act of 1932.
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