Firm Registration
In today's world, when the start-up culture is booming, every other day there is some or another business that is opening, and most business owners do not have awareness of the business compliances they must adhere to since they are mainly focused on their product. Registration is one such compliance, that business owners must do anyhow to bring their business into existance or have evidence of having their business existence.
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An Overview of Firm Registration
Registration of a business as a firm requires a different set of compliances and processes, we will be discussing in detail how a firm is registered. For registration as a firm, there can be two business structures that are- a Limited Liability Partnership( LLP) and a Partnership. We will be further discussing in detail about these structures, documents required to register the firm, steps for registration as well as the benefits of registering a firm.
Firm Registration Certificate [Sample]
Structure of Business
The structure of business that we choose to register our firm is very important. Following are the structures with the features generally by which a firm is registered.
LLP : LLP business structure is chosen, by businesses that want to operate based on partnership, by keeping their personal assets safe, and without going through much of the formalities of a company. The main feature that distinguishes LLP from a Partnership structure are the limited liability and the perpetual succession feature. Limited Liability means that the partners cannot be made liable personally for any business debts thereby, keeping the personal asset safe. And the perpetual succession makes the business unbothered by the changes in its partnership structure. One more distinct feature is that it acts as a separate legal entity, different from those of its partners. The minimum no. of people required to start an LLP is two, and there is no cap on the maximum no. of members. The functions, profit-sharing and all the important aspects relating to running the business are mentioned in the LLP Agreement, which governs how the partnership would operate:
It is governed by:
A: Limited Liability Act, 2008
B: Limited Liability Partnership Rule, 2009
C: LLP Agreement
Partnership : The Partnership Business Structure does not have limited liability separate legal entity, or even perpetual succession these features can lead to multiple benefits like building more trust between the partners. A partnership requires a minimum of two partners and maximum there can be 20 partners It does not have as much compliance as that of an LLP to be registered. It is represented by its partner and does not act as a separate legal entity, change in partners completely alters the business methodology. It operates on a contractual basis between the partners which is governed by the Partnership Deed. Partnership Business is governed by:
A: Indian Partnership Act, 1932
B: Partnership Deed
Documents needed for Registering a firm
The following are the Documents required for registering a firm
Address Proof and Identity of the Partners:
Adhar Card
- PAN Card
- Voter Id
- Passport
- Driving Licence
Proof Related to Place of Business:
- If the premise is rented, then a copy of the Rent Agreement
- If the premise is owned, then a copy of the Sale Deed
- No Objective Certificate( NOC) from the owner
- Copy of Water Bills, Electricity Bills, Receipt of Property
- Pan of the firm
- Partnership Deed/LLP Agreement
- An affidavit mentioning that the details presented in the documents are correct to the best of the knowledge.
Steps for Registering a Firm:
- Selection of Name
- Reserving the Name
- Draft the Partnership Deed/LLP Agreement
- Notarization and Execution of the Deed/Agreement
- Filing of the LLP Agreement/Partnership Deed with the Registrar of Companies(RoC).
- Application of PAN, (if under Partnership Structure)
- Certificate of Incorporation.
important Contents of the Deed/Agreement:
- Name of the Firm
- Details of the partners- Name and Address
- Commencement Date
- Profit/Loss sharing structure
- Interest on Capital
- Capital Contribution
- Salary payable
- Procedure of Admission and Retirement of Partners
Benefits of Registering a Firm
Partner : In case when a dispute arises between a partner or between a partner or ex-partners of a firm, they may consider legal proceedings to solve the dispute. Hence, having proper registration papers of the firm acts as evidence of exitance of the firm, the basis of which the dispute arose.
Or, if the partners choose to sue a third party to the business, then the registration of the firm becomes mandatory, but not mandatory when the situation becomes vice-versa that is when the third party tries to sue the firm.
An incoming partner can also sue the partners in case of any existing dues, on the part of the existing partners and the rights cannot be enforced if the firm is not registered, this improves credibility in the eyes of new incoming partners who would want to join the firm and bring some additional capital contribution to firm because no wants to contribute or invest in non- credible entities to safeguard their interests and money
Creditors : In case, when the firm has taken a certain loan and the creditor demands to repay the loan, then the registration documents provide clarity about who are the partners and who is liable to pay the loans to what extent. Registration also improves the credibility of the firm, when the creditors do due diligence related to the firm. Although, both registered and unregistered firms are valid in the eyes of low, having registration gives added advantages.
Other Benefits : Registration helps in other benefits like- it can help in claiming Income Tax Returns if the firm is registered, and in future, if the business chooses to change its business structure then having registration of the firm would also help, the registered firm is only considered for change in business structure.
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FAQs
What is the first step in registering a firm?
The first step in registering a firm is the choice of business structure- LLP, Partnership or Sole Proprietorship and checking the availability of the desired name.
How do I check the availability of a business name?
Availability of names can be checked via the online portal that is the MCA website or through the business office in the jurisdiction. One needs to ensure that the name chosen is unique and complies with the regulations of choosing the name.
Documents required for firm registration?
Documents required may vary from the business structure but common documents that are required are an Adhar Card, proof of address, LLP Agreement/ Partnership.
Can I register a firm online?
Yes, a firm can be registered online depending on the jurisdiction if it is allowed Registering online is a better choice and helps to streamline the process.
How long does it take to register a firm?
The time taken for registration depends upon the jurisdiction and the complexity of the application. It may range from a few days to a few weeks. It can be done faster if the right approach and guidance are taken.
Can I register my firm without any professional assistance?
Yes, a firm may be registered without any professional assistance. However, it is always advisable to seek professional help to make the process faster and make sure the process is properly complied with.
Do I need to obtain a separate bank account for my firm?
Though not compulsory, it is always advisable to obtain a separate bank account for the firm, doing this would maintain a clear separation between personal and professional finances.
How do I renew my firm's registration?
Renewal is subject to the jurisdiction of the firm, in some jurisdictions, periodic renewal is necessary whereas, in some jurisdictions, once registration is done there is no need for renewal unless significant changes are made in the business.