Partnership Business

How To Register A Partnership-Based Startup in India?

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One of the most common choices for entrepreneurs who want flexibility and shared responsibility is a partnership-based startup. This guide will walk you through the step-by-step process of How to register a partnership-based startup in India while addressing key considerations like trademark, GST, ITR filing, and Company Registration.

Step 1: Understand the Concept of a Partnership

A partnership is a contract between two or more people that states both sharing in profits and losses. This can be registered either under the Indian Partnership Act, 1932, or under the LLP Act, 2008, as a Limited Liability Partnership. In simple words, the traditional partnerships have an ease of formation, but the LLP gives limited liability protection to its partners.

Important Features of a Partnership-Based Startup:

  1. Easy formation process
  2. Shared responsibility and pooled resources.
  3. Lesser compliance as compared to Companies.
  4. More management flexibility.

Decision Step 2: Type of Registration

Whether to be a Partnership Firm or an LLP
Your first choice is to either be a Partnership Firm or an LLP


Partnership Firm:

  • It is governed by the Indian Partnership Act, 1932.
  • The primary legal document it requires is a partnership deed.
  • The partners hold unlimited liability.

LLP:

  • It is governed by the LLP Act, 2008.
  • It combines some features of a partnership and some of a private limited company.
  • Provides protection against liability to partners.

Suitable for startups, which can scale up easily and have lesser risks.

Step 3: Partnership Deed

A partnership deed is the lifeblood of your partnership-based startup. It details the roles, responsibilities, profit-sharing ratios, and working guidelines for partners.

Important Contents of a Partnership Deed

  1. Name of the partnership firm: It should be unique and not infringe any trademark.
  2. Information on partners: Provide names and addresses of partners with the amounts of capital they brought.
  3. Ratio of profits/losses sharing: Describe how profits or losses shall be shared.
  4. Activities of the business: Give a description of the business as well as the nature.
  5. Duration: Indicate if it is a time limited or an open-ended venture
  6. Bank accounts details: Show the operational accounts with authority levels.

Ensure that the deed is written on non-judicial stamp paper and notarized for authenticity.

Step 4: Register the Partnership Firm or LLP For Partnership Firm Registration:

  1. Application Submission:
  • File Form 1 with the respective Registrar of Firms in your state.
  • Attach the notarized partnership deed, PAN card, and address proof of partners.
  • Provide proof of the firm’s principal place of business (e.g., utility bill or rental agreement).
  1. Verification and Approval:
  • The registrar verifies the submitted documents.
  • Upon approval, you’ll receive a certificate of registration.

For LLP Registration:

1. Apply for a Digital Signature Certificate (DSC):

    • Partners need DSCs for online document submission.

    2. Apply for Director Identification Number (DIN):

      • Fill out DIR-3 form and get DIN for designated partners.

      3. Name Reservation:

      • Apply for unique Name through RUN-LLP portal by the Ministry of Corporate Affairs.

      4. Incorporation filing

      • Submit Form FiLLiP to the registrar of Companies.
      • Attach the agreement along with other documents of LLP with such form.

      5. Incorporation Certificate:

        • Once approved, you will receive the LLP incorporation certificate.

        Step 5: Get GST Registration

        If your startup’s annual turnover is more than ₹20 lakhs (₹10 lakhs for special category states) or if you make inter-state supply, then GST registration is compulsory.

        GST Registration Procedure:

        1. Go to the GST portal.
        2. Create a GSTIN by filing Form GST REG-01.
        3. Fill in the following details: PAN of the firm, proof of address, bank details, and valid email ID.
        4. Attach documents like partnership deed and proof of business address.
        5. Finalize the verification process.

        Once you are approved, you will be given a 15-digit GSTIN and you can lawfully collect and pay GST.

        Step 6: Trademark Registration

        Trademark registration is necessary for your brand identity, including your business name, logo, or slogan.

        Steps to Trademark Registration:

        1. Trademark search to be done for uniqueness.
        2. Filing of trademark application through the IP India portal: https://ipindia.gov.in/.
        3. Form TM-A to be submitted along with details of trademark, owner, and class of goods/services.
        4. Fees applicable to be paid.
        5. Examination and publication in the Trademark Journal
        6. Once approved, registration certificate will be received

        Trademark registration protects your startup’s intellectual property and helps in creating brand credibility.

        Step 7: Open a Business Bank Account

        Business banks account is crucial for account accuracy and operational convenience.

        Things Needed to Open a Business Bank Account

        • PAN card of the firm.
        • Partnership deed or LLP agreement.
        • GSTIN.
        • Certificate of registration.
        • Evidence about business address.

        This avoids interruptions in financial transactions and prevents any issues that may pop up during the ITR filing process.

        Step 8: Commence Observing Tax Compliance Requirements

        Filing ITR on time is very important for maintaining the legal and financial health of your startup. The nature of your business may require you to file a specific income tax return annually.

        Key Tax Compliance Requirements:

        1. PAN and TAN: Get a permanent account number (PAN) and tax deduction and collection account number (TAN) for the partnership.
        2. GST Returns: File monthly, quarterly, or annual GST returns, as applicable.
        3. Income Tax Returns: File ITR-5 for partnership firms and LLPs.

        Step 9: Get Licenses and Approvals

        • Industry-wise, you may require extra licenses like:
        • Shop and Establishment Act license.
        • FSSAI license, if your business is related to food.
        • Sector-specific permits.

        These will ensure your startup remains within the four walls of the law.

        Step 10: Ongoing Compliance

        After registering your partnership-based startup, regular compliance is required to avoid penalties and smooth operations.

        Important Compliance Tasks:

        1. Annual filing with the ROC for LLPs.
        2. Renewal of licenses and permits.
        3. Maintenance of financial records and audits.
        4. Updates in partnership deed or LLP agreement, if necessary.

        Conclusion

        Filing a Partnership-Based Startup in India requires some thoughtful moves and legal compliances. We will guide you step by step on how to file a partnership-based startup in India.
        The right start is the foundation for long-term success. Work with lawyers and financial experts to allow for an efficient process and focus on growing your dream venture.

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