Startup-Partnership

Overview

The Indian Partnership Act of 1932 governs partnership firms in India, defining partner rights, duties, and legal relations with third parties. It establishes the roles of partners and partnership firms in legal and contractual dealings related to their business.

What is Partnership?

A partnership, as defined by the Indian Partnership Act, involves individuals agreeing to share business profits. It requires three important elements: an agreement between two or more people, profit-sharing intent, and joint business operation by one or more for all. All conditions must be met for a partnership to form.

Benefit

Ease of Formation: Minimal legal formalities. Simple documentation process. Flexibility for changes.

Customizable Partnership Terms: Customizable terms in the partnership deed. Adjustable profit-sharing ratios. Flexible decision-making processes.

Defined Roles and Responsibilities: Clear roles are outlined in the partnership deed. Enhanced operational efficiency.

Resource Pooling and Expertise: Combined resources and capital. Shared skills and expertise. Enhanced business foundation.

Shared Liability: Distribution of risks and liabilities. Reduced individual burden.

Tax Benefits: Individual tax treatment for partners. Potentially favorable tax rates.

Confidentiality: Lesser legal requirements for disclosure. Enhanced privacy and confidentiality.

Tax & Process

Income Tax for Partnership Firms and LLPs: Flat 30% tax rate. No individual slab rates. 2% Education Cess and 1% SHEC. 10% Surcharge if income exceeds Rs. 1 Crore.

Capital Gains Tax: Sale of assets taxed under Section 112.

Shares and mutual funds: <1 year holding: 15% tax (Section 111A).1 year holding: Tax exemption (Section 10(38)).

Remuneration and Interest: Partners can receive remuneration and interest. Tax deduction is subject to Section 40(b) limits. Taxed as PGBP income for partners. Unallowed salary/interest not added to partner income.

Partner's Share Exemption: The partner’s share of the firm income is exempt. Already taxed at firm level.

Documents Required

• PAN Card and Aadhar Card of Partners
• Colour Photo of the partners
• Registered Premises details also have to be furnished
• Proof of Address has to be submitted.
• NOC from the Property Owner
• Rent Agreement/Property Tax Receipt
• Partnership Deed

Procedure

Documentation: Gather KYC documents of partners, the firm's address proof, and the rental agreement (if applicable).

Choose a Unique Name: Select an exclusive and relevant name for your partnership firm.

Partnership Deed: Draft the partnership deed on a stamp paper, signed by partners and notarized.

PAN and TAN: Apply for PAN and TAN for income tax and TDS compliance.

GST Registration: Register for GST to meet tax obligations; receive a unique GSTIN for future GST-related activities. Additionally, register your partnership firm with the Registrar of Firms (ROF) in your state either online or offline.

FAQ's