Partnership Firm Registration

Advantage of Partnership:-

1. Easy Formation:-
• Partnership is a contractual agreement between the partners to run an enterprise. Hence, it is relatively ease to form. Legal formalities associated with formation are minimal. Though, the registration of a partnership is desirable, but not obligatory.

2. More Capital Available:-
• We have just seen that sole proprietorship suffers from the limitation of limited funds. Partnership overcomes this problem, to a great extent, because now there are more than one person who provide funds to the enterprise. It also increases the borrowing capacity of the firm. Moreover, the lending institutions also perceive less risk in granting credit to a partnership than to a proprietorship because the risk of loss is spread over a number of partners rather than only one.

3. Combined Talent, Judgment and Skill:-
• As there is more than one owner in partnership, all the partners are involved in decision making. Usually, partners are pooled from different specialised areas to complement each other. For example, if there are three partners, one partner might be a specialist in production, another in finance and the third in marketing. This gives the firm an advantage of collective expertise for taking better decisions. Thus, the old maxim of “two heads are being better than one” aptly applies to partnership.

4. Diffusion of Risk:-
• You have just seen that the entire losses are borne by the sole proprietor only but in case of partnership, the losses of the firm are shared by all the partners as per their agreed profit-sharing ratios. Thus, the share of loss in case of each partner will be less than that in case of proprietorship.

Disadvantages of Partnership:-

1. Unlimited Liability:-
• In partnership firm, the liability of partners is unlimited. Just as in proprietorship, the partners’ personal assets may be at risk if the business cannot pay its debts.

2. Divided Authority:-
• Sometimes the earlier stated maxim of two heads better than one may turn into “too many cooks spoil the broth.” Each partner can discharge his responsibilities in his concerned individual area. But, in case of areas like policy formulation for the whole enterprise, there are chances for conflicts between the partners. Disagreements between the partners over enterprise matters have destroyed many a partnership.

3. Risk of Implied Authority:-
• Each partner is an agent for the partnership business. Hence, the decisions made by him bind all the partners. At times, an incompetent partner may lend the firm into difficulties by taking wrong decisions. Risk involved in decisions taken by one partner is to be borne by other partners also. Choosing a business partner is, therefore, much like choosing a marriage mate life partner.

4. Lack of Continuity:-
• Death or withdrawal of one partner causes the partnership to come to an end. So, there remains uncertainty in continuity of partnership.

• 1)    Drafting of Partnership Deed.
• 2)    Obtaining PAN card for the Partnership business.
• 3)    Obtaining TAN for the Partnership business.
• 4)    Service Tax registration all over India.
• 5)    VAT/CST registration in New Delhi.
• 6)    Opening of current bank account in the name of the Partnership business.
• 7)    Maintenance of books of account for the Partnership business.
• 8)    Filling of Income tax return, service tax return, sales tax return and TDS return if any.