Indian Partnership Act of 1932 prescribes the law relating to a partnership firm in India. Partnership Act lays down the rights and duties of the members/partners among themselves and other legal relations between partners and any third persons, which are incidental to forming a partnership.
A partnership is a relationship between persons, agreed to share the profits of business activities carried on by all partners/members or any one of the partners/members acting for all. Therefore, a partnership firm contains three essential elements.
- A partnership firm must be a result of a legal agreement between two or more individuals.
- The agreement must be made to share the profits obtained from the business.
- The business must be run by all or any of them representing the rest.
All these conditions must coexist before a partnership can come into existence.
Certain common Compliances of Partnership Firm
1. Registration of firm with a time limit of 1 year.
2. Change in Firm Name or Principal Place or Nature of Business with a time limit of 90 days.
3. Closing and Opening of Branches with a time limit of 90 days.
4. Compliance of Change in Name / Address of Partner with a time limit of 90 days.
5. Change in Constitution or Dissolution with a time limit of 90 days.
6. When a minor becomes major and elects to become or not to become a partner with a time limit of 90 days.
7. Under Tax Compliance; Filing of Return of Income
What are the advantages of the Compliances of Partnership Firm ?
1. Timely compliance creates track records of Partnership Firm in the eyes of Law.
2. Hefty and stringent penalties are avoided.
3. Easy Borrowing opportunity for Partnership Firm having regular compliance history.
4. Fast approval when Partnership Firm goes for any new ventures due to clear image in the eyes of Law such as Joint Venture with Foreign entity and many more advantages are there.
5. Partners are saved from being personal tax implications and heavy income tax penalties and inquiries.