Under Income Tax Act, a partnership firm is defined as “Persons who have entered into a partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”.
Partnership is an agreement between two or more people to share the profits of a business. The business can be carried on together by all the partners or any one partner representing the others.Three elements are need to form a partnership:
It is not compulsory for a partnership deed to be in writing. Partnerships can also be oral.
The Partnership Act does not prohibit a non-citizen from joining an Indian partnership firm, subject to necessary clearances and permissions from satisfactory authorities in this regard.
Capital is the initial amount in cash or kind contributed by the partners to start the business. There are no such guidelines on minimum capital by partners. It is not necessary for each partner to contribute equally to the capital. The contribution is based on the agreement between the parties.
Partners must be major, should be sane and should not be disqualified by law from entering into a contract. A minor cannot be a partner in Partner ship firm. However as per Section 30 of the Indian Partnership Act, with the consent of all the partners for the time being, he may be admitted to the benefits of partnership by an agreement executed through his guardian with the other partners.
The following information is essential:
Yes, a partner can transfer his share in the business to an outsider, but only with the consent of all other partners.
Yes, partners may be partners in another firm in their individual capacity.
Once tax is paid by firm, no tax will be payable by the partners on share of income from the firm. However Interest and/or remuneration etc. received by a partner will be taxed in his hands as Business or Professional Income.
Easiest GST ready Accounting software