DISADVANTAGES OF UNREGISTERED PARTNERSHIP FIRMS

 Cannot File a Suit Against a Co-Partner or a Third Party:

A business is bound to face challenges at some point in time. Either there might
be disagreements or conflicts arising between the partners or there might be
issues such as a breach of the contract created by third parties. Unfortunately, a
partnership firm that has skipped registration cannot avail of any legal support
in this case. In such scenarios, the firm loses its right to sue a third party or a co-
partner. Neither the partners nor any person can act on behalf of the firm at such
an instance. In the case of Jagat Mittar Saigal vs Kailash Chander Saigal, it
was held that, in order to sue, the firm or the partner in question must have their
name registered with the Registrar of Firms. However, the partners can resolve
the dispute through arbitral proceedings, as held in Umesh Goel v. Himachal
Pradesh Co-operative Housing Society Ltd in 2016.

 Cannot Avail Set-Off Claim Against Third Parties:

The principle of set-off claims is explained in section 69(3) of the Partnership
Act, of 1932. In a set-off claim, the debtor makes adjustments and can put
forward reciprocal claims in the mutual debts with the creditor. However, when
a partnership firm is not registered this principle cannot be put into practice.

 Third Parties Cannot be Estopped from Suing the Unregistered

Partnership Firm:
Although an unregistered partnership firm cannot sue a third party, the converse
cannot be prevented by the Act. Thus, A third party can still go ahead and file a
case against the unregistered partnership firm. Merely, because the firm does
not have the right to sue does not render it immune to legal suits filed by other
parties.
 Partners Cannot Take Action Against Another Partner:

In an unregistered partnership firm, a partner cannot take any legal action

against a co-partner. Any breach of contract or conflicts of interest cannot be
addressed by the law in the case of unregistered partnership firms. In an
unregistered partnership firm, the partners cannot enforce their rights.
  Conversion To Another Entity Becomes Impossible:
A registered partnership firm has the option of getting itself converted to any
other corporate entity like that of an LLP. This privilege is not available to
unregistered partnership firms.

SECTION 69 of partnership act states effects of non-registration

Under Section 58 of the Indian Partnership Act, 1932, a firm may be

registered at any time (not merely at the time of its formation but
subsequently also) by filing an application with the Registrar of Firms of
the area in which any place of business of the firm is situated or proposed
to be situated.

DOCUMENTS REQUIRED
To apply for partnership firm registration in Delhi, produce the following
documents along with the application.

 Form No.1 duly filled and affixed Rs.3 court fee stamp.
(https://industries.delhi.gov.in/sites/default/files/generic_multiple_files/
10th.pdf)
 A photocopy of Partnership deed on minimum stamp paper or Rs.200.
 Ownership Proof of Principal Place (Registered document of the property
/ House tax receipt / Water bill / Electricity bill in the name of the
property owner)
 Rent agreement (If rented property).
 PAN of Firm
 PAN of Partners
 Photo Identity Proof of Partners. (PAN / Driving License / Voter ID /
Passport /Aadhar)
 Passport size Photos of Partners, Phone Numbers, Email.
 Residential proof of all the partners (Aadhar /Voter card / Passport /
Driving Licence).
 Affidavit/NOC on Rs.10 and Rs.5 Notary stamp.
 Affidavit/NOC on Rs.10 and Rs.5 Notary stamp and ownership proof of
other places (if mentioned in Form no.1).
 Current Bank Account
 GST Registration
  TAN

Any of the following individuals must attest to all the documents mentioned
above:

1. Magistrate of 1st class

2. Gazetted Officer
3. Notary Public
4. Advocate
5. Chartered Accountant

PARTNERSHIP DEED CONTENTS

While making a partnership deed, all the provisions and the legal points of the
partnership deed are included. This deed also includes basic guidelines for
future projects and can be used as evidence at times of conflict or legal
procedures. For a general partnership deed, the below mentioned information
should be included.

 Name of the firm as determined by all partners.

 Name and details of all the partners of the firm.
 Nature of business
 The date on which business and partnership will commence.
 The duration of the partnership (if it is not to be unlimited).
 Authorised Signatory
 Amount of capital contributed by each partner.
 Profit sharing ratio between the partners.
 Duties, obligations and power of each partner of the firm.
 The salary and commission if applicable that is payable to partners.
 The process of admission or retirement of a partner.
 The method used for calculating goodwill.
 The procedure that must be followed in cases of dispute arising between
partners.
 Procedure for cases where a partner becomes insolvent or dies.
 Procedure for settlement of accounts in the event of dissolution of firm.
NOTE –

Decide on a Firm Name: Choose a unique name for your partnership firm.
Ensure that the name does not infringe on any existing trademarks or violate
any rules or regulations.

Apply for PAN: Obtain a Permanent Account Number (PAN) for the
partnership firm. You can apply for PAN online through the official website of
the Income Tax Department or visit a PAN facilitation centre by filling 49A
form.

For obtaining a GST registration, a firm needs to submit PAN number, identity
& address proofs of the partners and firm. Authorised signatory (Signatory's
proof of Appointment) will sign the application either using a digital
signature certificate or E-Aadhar verification. If the annual turnover is over 40
lakhs.

For Obtaining TAN no.

a) An applicant will fill Form 49B online and submit the form.
b) If there are any errors, rectify them and re-submit the form.
c) A confirmation screen with all the data filled by the applicant will be
displayed.
d) The applicant may either edit or confirm the same.

For opening a Current Bank Account, a firm needs to submit the following
documents:
• Partnership deed
• Partnership firm PAN card
• Address Proof of the partnership firm
• Identity proofs of all the partners
• Partnership registration certificate (if partnership has been registered)
• Any registration document issued by central or state government
(normally GST certificate is submitted)
• Copy of electricity bill, telephone bill or water bill (not more than 3
months old)
• Authorisation letter on the letterhead of the firm authorising a partner as
authorised signatory for the bank account.

Signatory's proof of Appointment

Most importantly, when you choose a partner to be the authorised
signatory, you must get an official letter for the same as proof. The letter
of appointment has all the details of the partner who will act as the
authorised signatory for the firm. Also, it states that all the documents
signed by the signatory related to the business will be binding the firm.
Moreover, they will be the primary contact with the GST department on
the firm's behalf.

Therefore, after the appointment, all the documents must be signed by

the authorised signatory to be valid.

Here is the format of the letter:

Declaration of the authorised signatory

I/We _________ (details of signatories like partners/Directors/members)

________________, hereby solemnly affirm and declare Mr/Mrs/Miss
______________ (details of authorised signatory to be declared)
_________ as the authorised signatory for the_______
(Company/Firm/Society ) ___________ .

All the actions of the authorised signatory will be binding to the

(Company/Firm/Society). He/She shall henceforth, act as the authorised
signatory for all GST purposes.

Name

Designation/Status
Signature

NOTE: More than one partner can also be an authorised signatory.

Acceptance format of the authorised signatory letter

I __________________ (name of signatory) _____________,

hereby solemnly affirm and accept to be the authorised signatory of the
________________ (Company/Firm/Society)_____.

()

Signatures of Authorised Signatory

Obtain other Licenses and Permits: Depending on your specific business

activities, you may need to obtain additional licenses and permits from relevant
authorities, such as trade licenses, shop establishment licenses, professional
licenses, etc.

REGISTRATION PROCESS

Step 1: Approach the Registrar of Firms and Societies in Delhi

The applicant has to approach the concerned Registrar with the application;
affidavit in a prescribed format along with all supporting documents needs to be
submitted.

Step 2: Complete the Details

Now, fill all the mandatory details such as Firm details and Partners of the firm
in form 1.

Step 3: Submit the Application Form

Then attach all the supporting documents with the form and submit it to the
office.

Step 4: Collect Application ID

After submitting the form, collect your application I.D., and that can be applied
for future reference.

Step 5: Issuance of Certified Copies

The concerned authority, Registrar, will process the Partnership firm

Registration request and after successful verification, the Registrar will issue the
documents.The time taken in registering a partnership firm is around two weeks
provided we get all the relevant documents on time.

The stamp duty of the paper on which the Partnership Deed is drafted may
vary between 1% of the capital and INR 5000 whichever is less

Similarly, the registration and documentation fee to register the deed which
depends on current state laws, but in most cases, it costs around INR 1000.