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PARTNERSHIP FIRM COMPLIANCE

"GST registration is essential for legal business operations and unlocking tax benefits."

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PARTNERSHIP FIRM COMPLIANCE

Partnership Firm compliance is basically a set of rules and regulations that partners in a firm need to follow to keep everything running smoothly and legally. When you and your buddy decide to start a business together as partners, you might choose a partnership firm as the business structure. Compliance involves a bunch of things, like registering the firm, keeping proper records, stating your profits and losses, and filing taxes on time. It means you're following the government regulations, like the Partnership Act and sometimes local laws, so you don’t end up with unwanted legal troubles or fines. This might sound a bit overwhelming, but it's all about making sure your partnership runs legally and efficiently, and everyone’s on the same page. Because no one wants a surprise legal issue in the middle of a potential business boom.

PARTNERSHIP FIRM COMPLIANCES

1. Firm Registration (Optional)

To obtain legal advantages, register with the Registrar of Firms (RoF).

2. Income Tax (Required)

i) Obtain a PAN card for the firm.
ii) Submit a yearly ITR-5.
iii) Tax Rate: 30% plus 4% tax.
iv) If paying professionals, rent, or salaries, deduct TDS.
v) If the liability exceeds ₹10,000, pay the advance tax.

3. GST (If applicable)

i) If your turnover is ₹40L+ (goods) or ₹20L+ (services), register for GST.
ii) Submit monthly or quarterly GST returns.

4. Accounts and Audit (If Needed)

i) Keep track of your earnings and outlays.
ii) Audit is necessary if -
a) ₹1 crore or more in turnover (₹10 crores if primarily digital).
b) Over ₹50 lakhs is the professional income.

5. Employee Compliances (If Staff Hired)

i) EPF (20+ employees)
ii) ESI (10+ employees earning ≤₹21,000)
iii) Professional Tax (State-wise)

6. Other Licenses (If Needed)

FSSAI, MSME, Shop & Establishment

7. LLP Compliance (If Firm is LLP)

Form 8 (by 30th October) & Form 11 (by 31st May)

PARTNERSHIP FIRM REGISTRATION PROCESS IN INDIA

1. Select a Firm Name:

Select a distinctive name that complies with legal requirements.

2. Draft a partnership deed, which is a formal document that includes the following information: 

i) Business name and partners' data 
ii) Profit-sharing ratio 
iii) Partners' rights and obligations

3. Obtain a PAN card for the company: 

Apply to the Income Tax Department for a solid PAN.

4. Open a Bank Account:

To open a current account, need the Partnership Deed and PAN.

5. Register with the Registrar of Firms (recommended but optional):

i) Complete Form 1 and send it in with your partner IDs and partnership deed.
ii) Pay the state-specific registration cost.

6. Submit Additional Registrations (If Required):

i) Registration for GST (if turnover surpasses ₹40L/₹20L).
ii) Small business registration as an MSME.
iii) Registration of Shops and Establishments (if employing).

  • FAQ
1. Is registering a partnership firm required? 

No, it is not required to register; but, a registered firm has legal advantages, such as the ability to file a lawsuit.

i) Income Tax: 30% flat plus 4% tax.
ii) TDS: Subtract if you're paying professional fees, rent, or salary.
iii) GST: Needed if sales above ₹40L for commodities or ₹20L for services.

Every year, ITR-5 must be filed by July 31st if it isn't audited or September 30th if it is.

i) If a business's turnover exceeds ₹1 crore (₹10 crores for digital transactions), an audit is required.
ii) A professional makes more than ₹50 lakhs.

If GST is registered, submit:
i) GSTR-1 (Sales details): Quarterly or Monthly.
ii) GSTR-3B (Summary return): Quarterly or monthly.
iii) GSTR-9 (Annual Return): If the turnover is more than ₹2 crores.

i) Provident Fund (EPF): If it has 20 or more employees.
ii) Employee insurance, or ESI, is required if ten or more employees make at least ₹21,000.
iii) State-mandated professional tax.

Registration for GST (if turnover surpasses threshold).
i) Optional MSME registration for small enterprises.
ii) Shops and Establishment Act (if employing workers).
iii) If in the food industry, an FSSAI license is required.

Late filings and non-compliance are subject to penalties and interest.
i) Income Tax: late ITR filing might result in a penalty of ₹1,000 to ₹10,000.
ii) GST: Interest and late fines.
iii) TDS: 1% - 1.5% monthly interest on past-due payments.

Yes, in order to profit from limited liability, it can be changed into a Private Limited Company, or LLP.

i)Partners must agree. If registered, file a dissolution document with the Registrar of Firms.
ii) Before closing, settle all outstanding taxes and debts.