Partnership firm

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 November 2011 my brother is practicing ca from last two years and i have cleared c.a n m deciding to join him.
in this regard, i want to know how should we constitute partnership firm ??
should we form new partnership firm or else my brother should add me in his firm and then he should change constitution of his firm from proprietory firm to partnership ??
please help as early as possible

C.A.Javid Patel

C.A.Javid Patel (Expert)
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18 November 2011 The Second option is better where tell your brother to add you in the partnership firm and change the constitution of the Firm.

Querist : Anonymous

Querist : Anonymous (Querist)

19 November 2011 sir thanx for the advice, but my brother is having a proprietorship firm not an partnership, so if we form a partnership firm, then will seniority of my brother's firm end ??

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C.A.Javid Patel

C.A.Javid Patel (Expert)
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20 November 2011 NO please do the business on the name of firm which your brother has using currently and while preparing the firm profile you mentioned that ABC & CO has done so much work etc. and alsm mentioned in your brother profile work done by him.

Querist : Anonymous

Querist : Anonymous (Querist)

23 November 2011 sir i am still not clear...

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 August 2024 Deciding how to constitute a partnership firm with your brother involves several considerations, including the structure of the new partnership, the transition from a proprietorship, and implications for seniority and registration. Here’s a detailed guide to help you through the process:

### **Options for Constituting a Partnership Firm**

**1. Form a New Partnership Firm**

**Steps:**

1. **Draft a Partnership Deed:** Create a partnership deed that includes details such as:
- **Name of the Firm:** The new name of the partnership firm.
- **Business Address:** The location where the business will operate.
- **Partners' Details:** Names and addresses of all partners.
- **Capital Contribution:** Each partner's initial capital contribution.
- **Profit and Loss Sharing Ratio:** How profits and losses will be shared among partners.
- **Roles and Responsibilities:** Duties and responsibilities of each partner.
- **Remuneration and Interest on Capital:** Terms for any remuneration or interest on capital.
- **Bank Account Details:** Details about the firm's bank account.
- **Duration of Partnership:** Whether the partnership is for a fixed term or indefinite.
- **Dissolution Terms:** Procedures for dissolving the partnership if necessary.

2. **Register the Partnership Firm:**
- Apply for registration with the Registrar of Firms in your state. Submit the partnership deed, proof of address, and identity proof of partners.
- Obtain a Certificate of Registration from the Registrar of Firms.

3. **Obtain Necessary Licenses and Registrations:**
- **PAN Card:** Apply for a PAN card for the new firm.
- **GST Registration:** If applicable, get GST registration.
- **Trade License:** Obtain a trade license if required.
- **Professional Tax Registration:** Register for professional tax if applicable.

4. **Open a Bank Account:** Open a bank account in the name of the new partnership firm.

**Pros of Forming a New Firm:**
- **Clear Start:** A clean slate for the new partnership.
- **Flexibility:** Ability to define the new firm’s structure and terms.
- **Seniority:** The new firm will not inherit the seniority of the existing proprietorship.

**2. Add You to the Existing Proprietorship and Change Constitution**

**Steps:**

1. **Amend the Existing Firm’s Structure:**
- **Partnership Deed:** Prepare a new partnership deed adding you as a partner and defining the new terms.
- **Change in Constitution:** Update the existing firm's constitution from a proprietorship to a partnership.

2. **File for Change of Constitution:**
- Submit the amended partnership deed to the relevant authorities to update the firm's records.
- Inform the Registrar of Firms (if registered) about the change in constitution.

3. **Obtain New Registrations and Licenses (if necessary):**
- Update or obtain a new PAN card reflecting the change.
- Update GST registration if necessary.
- Ensure all other licenses and registrations are updated to reflect the new partnership.

4. **Update Bank Accounts and Financial Records:**
- Inform the bank of the change and update the account details.
- Adjust financial records to reflect the new partnership structure.

**Pros of Adding You to the Existing Firm:**
- **Continuity:** The existing firm's name, goodwill, and seniority are retained.
- **Less Disruption:** Maintains continuity in business operations and client relationships.

**Considerations:**
- **Seniority:** If the new partnership is a continuation of the existing proprietorship, the seniority in terms of registration and business experience may be retained.
- **Reputation and Branding:** Existing clients and suppliers may continue their association with the same firm name, preserving goodwill.

### **Decision Factors**

1. **Seniority and Goodwill:** If the existing firm has built significant goodwill and seniority, continuing with the same name might be beneficial.
2. **New Firm’s Benefits:** If a new start is preferred, forming a new firm provides flexibility in terms of structure and operations.
3. **Legal and Compliance Issues:** Consider the legal implications of either choice, including the ease of registration and transition.

### **Draft of Partnership Deed for Addition of Partner**

**Partnership Deed Sample**

**Partnership Deed of M/s [Firm Name]**

This Deed of Partnership is made on [Date] between:

1. **[Your Brother’s Name]**, residing at [Address], hereinafter referred to as "Partner A".
2. **[Your Name]**, residing at [Address], hereinafter referred to as "Partner B".

**1. Name and Address of the Firm**
The partnership firm shall be known as M/s [Firm Name] and shall have its principal office at [Address].

**2. Nature of Business**
The firm shall engage in [Nature of Business].

**3. Capital Contribution**
- Partner A shall contribute [Amount] as capital.
- Partner B shall contribute [Amount] as capital.

**4. Profit and Loss Sharing Ratio**
The profit and loss of the firm shall be shared as follows:
- Partner A: [Percentage]%
- Partner B: [Percentage]%

**5. Duties and Responsibilities**
- Partner A shall be responsible for [Responsibilities].
- Partner B shall be responsible for [Responsibilities].

**6. Remuneration**
No remuneration shall be paid to the partners.

**7. Interest on Capital**
Interest on capital shall be provided at the rate of [Rate]%.

**8. Bank Account**
The firm’s bank account shall be maintained at [Bank Name].

**9. Duration**
The partnership shall be for a term of [Number] years, commencing from [Date].

**10. Dissolution**
In the event of dissolution, the assets and liabilities shall be distributed as per the terms mentioned in the dissolution clause of this deed.

**11. Dispute Resolution**
Any disputes arising shall be resolved through [Mechanism].

**IN WITNESS WHEREOF**, the partners have set their hands to this deed on the day and year first above written.

**Partner A:**
[Signature]
[Name]

**Partner B:**
[Signature]
[Name]

**Witnesses:**

1. [Witness Name]
[Address]
[Signature]

2. [Witness Name]
[Address]
[Signature]

By following these steps and considering the above factors, you can make an informed decision on how to constitute your partnership firm with your brother.