Partnership

The partnership type of incorporation is simply a partnership between two or more owners with one common goal, which in most cases is profits. Similar to Sole Proprietorship, a partnership is not a separate entity and hence, not necessary to register this type of firm. However, getting your firm incorporated as a partnership has its added advantages.

Indian Partnership Act 1932 is the governing law that regulates partnership firms in India. As per the act, “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”

Benefits

Easy Incorporation process
Partnership incorporation involves simple steps and documentation such as a legally appropriate Partnership Agreement and a Partnership deed to lay down all the rules and formalities of such partnership. There are no other documents required outside the partnership deed. The registration process with the Registrar of Firms is easy and not mandatory.
Less compliance
In comparison to a business or an LLP, a partnership firm is subject to far fewer regulations. A Digital Signature Certificate (DSC) and Director Identification Number (DIN), which are necessary for corporate directors or designated partners of an LLP, are not required for the partners. The dissolution process is much easier without any legal formalities.
Cost-efficiency
The registration process is cheaper than other forms of incorporation; hence, cost-effective.
Sharing of ownership
Not just profits, but partnership ensures equal ownership of responsibilities and losses. The joint liabilities help the business flourish better.
Legal implications
In case of any discrepancy in the contract, a partner can file a suit against other partners or a third party and claim the proceedings provided it is registered as a partnership firm with the Registrar of firms.

Limitations

Limited Resources
The maximum number of participating partners of such type of firm is 20.. The number of partners is limited, and as a result, the amount of capital invested in the firm is also limited. The total amount contributed by individual partners makes up the firm's capital. As a result, the partnership firm's resources are restrictively used, and it is unable to pursue large-scale operations.
Unlimited Liabilities
A partnership, like a sole proprietorship, includes partners having unlimited liabilities. The liability created by one partner of the partnership firm is to be borne by all the firm partners. If the firm’s assets are insufficient to pay the debt, the partners will have to pay off the debt from their personal property.
Raising funds
Since the partnership firm does not have perpetual succession and is a separate legal entity, it is difficult to raise capital. The company's choices for generating finance and expanding its operations are limited. Customers' and investors' lack of faith in the company makes it tough for this type of company to survive.

Documents Required

Though essentially Partnership firm entails no mandatory registration, firms often register themselves for the safe bubble it provides. If you still plan to go for a partnership registration, these are some of the documents that you must keep handy with you.

Partnership Deed
PAN card of Firm
Address proof of the firm
PAN cards of partners and their address proofs
GST Registration
Current bank account details
Affidavit ensuring all the documents are correct.

Note: The registration of partnership firms is compulsory in Maharashtra.

Registration/ Incorporation Process

A Partnership deed is often advised even though it has no or less relevance to the official registration. It is an agreement between the partners that specifies their rights, duties, earnings, shares, and other obligations. A partnership deed can be documented or oral. However, it is always better to draft a partnership deed in order to avoid future disagreements.
Choose a unique name for the firm.
Open a bank account in the business's name to direct all the business transactions through this bank account for ease.
Send the filled application form to the Registrar of Firms in the state where the business is located, together with the required fees. All the participating partners or their agents must sign and verify the registration application.
A certificate of registration is issued pertaining to the fact that all documents submitted are true and correct.

Post-Incorporation Compliances

Any partnership firm must file the Income Tax Return without considering their profit or losses.
If a partnership has GST registration, GST returns must be filed every month and quarter as per the scheme under which the business is registered.

Closure of Partnership

If a firm's partners choose to discontinue their partnership, they can do so by dissolving it by notice if it is a willful partnership. A partnership can be dissolved either according to the conditions of the Partnership Deed or by entering into a separate agreement. You can also convert it into an LLP, but the firm should be registered as a partnership, and the LLP partners should be the same as a partnership firm. The Ministry of Corporate Affairs permits converting a Partnership Firm into Company under the Companies Act, 2013.