Registration and Dissolution of a Firm

Introduction

A partnership is a relation between two or more people who’ve already agreed to do business collectively and divide the earnings from a business by all of them or by one acting on behalf of all of them. Individuals that have formed a partnership with one another are referred to as Partners, and the as a whole is referred to as a Firm. The Indian Partnership Act, 1932, requires registration to start and run a partnership firm. Its procedure is far easier and less complicated than incorporating a company. So let’s discuss more about registration and dissolution of a firm in partnership in detail. 

Procedure for Registration of a Partnership Firm: 

To register a company under the law, basic procedures should be followed: 

Pick a name:

To identify themselves in front of the public, every company needs a distinct name. It cannot be the same as a previously defined firm or corporation. Check whether another corporation or firm has already taken the name. Also, choose a unique domain name and trademark for the company, then register them to prevent others from using similar names to deceive the public.

Create a Partnership Agreement:

The partnership deed detailed the rights and responsibilities of each of the firm’s partners. At a bare minimum, it includes the firm’s names and addresses, the partners’ names and addresses, the type of the business conducted, the partnership’s tenure, each partner’s capital commitment, or each partner’s profit-sharing percentage.

Aside from the basic details, the deed also includes additional terms based on the partners’ preferences or requirements. These clauses could include:

• The procedure for accepting a new partner.
• Partners are paid commissions or salaries.
• Each partner’s authority and obligation.
• The capital contribution of the partner’s interest.
• Procedure for auditing.
• Procedure for retirement. etc

To be legally valid, the partnership deed is written on a stamp paper in the correct format then signed by each partner in front of a notary. A PAN card is also necessary for the partnership firm because it must pay taxes.

• Complete the registration application covering all of the firm’s and partners’ basic information. Each partner should sign the document. To finish the registration process, apply and pay the needed fee to the Registrar of Companies. The partnership registration would not be complete until all fees and duties have been done.
• The Registrar examines the application and any supporting documents, and if everything looks decent, the registration certificate is provided within a week.

Procedure to Dissolve a Partnership Firm:

The dissolution of a firm is the legal phrase for the firm’s closure. The Indian Partnership Act defines the dissolution of the firm as the termination of partnership between all parties included in the said partnership. The methods for dissolving a partnership firm are as follows:-

• Mutually agreed-upon dissolution:

This is the most straightforward method of dissolving a partnership firm. The partnership firm could well be dissolved if all of the partners agree to dissolve it. Partners might also agree to dissolve the partnership company in agreement. 

• Mandatory Dissolution:

A partnership or business may be dissolved if it ceases to be legal due to the occurrence of any event that makes it illegal for the partnership and business to continue. A firm can also be dissolved if all partners agree or if one of the partners becomes insolvent.

• Dissolution of a partnership by notice at will:

Only if the partnership is at will, a partner could give written notice to the other partners of his desire to dissolve the firm. In this situation, the firm would be dissolved since the notice specified the dissolution date. If no date is specified in the notice, a date for such a firm’s dissolution shall be notified.

• Dissolution by the court:

If a partner files a lawsuit to dissolve the partnership firm, the court could do so because a partner is becoming unsound, completely incapable of fulfilling his duties as a partner, if a partner has engaged in behaviour that may harm the business and also the firm, if a partner transmits his interest in the partnership firm to a third party, or any other ground; well that’s just but also equitable for the partnership firm to be dissolved.

Conclusion

After the dissolution, Who is responsible? The partners aren’t liable for any transaction or other similar responsibility after the partnership firm’s dissolution, although they are responsible for transactions well before its dissolution. Although registration of a partnership firm is not required in India, it gives it legal status. It makes it easier to transform it later into other organisations such as an LLP or a company. I hope now you understand all about the partnership’s registration and dissolution of a firm. By reading this above-mentioned information, you will be able to clear all your doubts. Hence, read the information thoroughly.