Firm Registration: its type, Process, and Benefits

Firm registration is a legal process for officially registering your business in India. This takes place under the proper government rules. This gives your business legal recognition and protects your brand. It also allows smooth financial transactions.  It helps to ensure that you comply with the business laws of India. Do you know that many business owners delay firm registration in India? The reason behind this issue is a lack of knowledge.

So, if you don’t want to be one of them, then sit tight. This blog is your ultimate guide towards firm registration. Let’s read together to know more about it.

What is firm registration?

Before telling you what the process of firm registration in India is, you need to know what it is. This refers to the formal process of registering your business. This takes place with the Register of Firms under the Indian Partnership Act 1932. The firm registration is generally applicable to partnership firms. It is also applicable to other types of firms. However, it depends on local regulatory requirements. Here you can ask me a question. Is it always mandatory? The answer is not always mandatory. But having a firm registration gives you legal recognition. It helps you with dispute resolution and allows access to the government schemes, tenders and credits.

Who needs a firm registration in India?

In India, firm registration is needed for businesses like:

• Partnership Firms; formed with the agreement of two or more persons. Here, the partners operate businesses and share the profits. It is governed by the Indian Partnership Act 1932.
• Proprietary firms, or a business of a single owner.  If you are a sole proprietor, you may not need to be registered with the register of firms. You can register under GST, Udyam and so on for legal recognition.
• If you are a limited liability partnership, you need a firm registration. LLPs are a blend of a company and a partnership. You can register this under the LLP Act 2008. It comes under the Ministry of Corporate Affairs or MCA

To be more specific with you, majorly, partnership firms opt for firm registration in India. 

The types of firm registration in India

Want to know about the types of firm registration in India? Let me break it down for you.

(i) Partnership Firms

• It means the partners register their business with the Register of Firms.
• Here, if you are a business partner or an owner, you should register under the register of firms of the state
• It is not mandatory for your business
• The partners can apply either at the beginning of the business. Or, you can also apply during the operations
• Please remember, for  a partnership firm, two or more people need to come together as partners
• All your partners should agree on a firm name. A partnership deed is also needed.

(ii) Sole proprietorship

As a sole proprietor, you can also opt for firm registration in India. Before opting for the process, you need to check if you fulfil these criteria:

• You have to be an Indian resident.
• Secondly, your legal competence should be there to enter into contracts
• You need to operate the business under your own name. You can also go from trade name

Thinking of the capitals you need for firm registration under sole proprietorship?

Sole proprietorships do not require firm registration but may obtain GST, Udyam, Shops & Establishment registration for recognition.

Why do you need firm registration in India?

Firm registration gives you various benefits. These are listed below for you. If you are a partnership firm:

(a) Easy incorporation

• If you are a partnership firm, firm registration is very easy for you.
• You can register just by drafting the partnership deed. Besides, you need a partnership agreement
• Do you know, partnership deed is your primary document?

Yes, you have read it right. The partnership deed is primary, not the only document.

• Another piece of good news for you. You don’t need to register with the Register of Firms.
• You can register on the later dates, as partnership firm registration is voluntary.

(b) Less compliances

• As a partnership firm, there are very few compliances for you
• These are way lesser that than a company or LLP
• You or your partners don’t need a Digital Signature Certificate (DSC) and a Director Identification Number (DIN)
• You and your partners can bring any changes to the businesses easily
• It is cost-effective. Your registration process is cheaper than that of a company or LLP.
• Do you know another very important benefit of this?  The dissolution of the partnership firm is easy. It does not involve many legal formalities.

(c) Quick decision making

• For your partnership firm, decision making process is simple and easy
• There is no difference between management and ownership
• After firm registration, you and your partners can make all the decisions
• You can also implement decisions quickly
• Besides this, partners have a powers to do activities on behalf of the firm

(d) Equal share of profit and losses

• After firm registration, you and your partners can share profits and losses equally
• As a business, you will have the freedom to decide the profit and loss ratio
• Since the profit and loss depend on your quality of work, there will be a sense of accountability.

Are you an LLP planning to opt for firm registration in India? Here is how it can benefit you:

(i)  A separate legal identity for your business

• A firm registration in India gives you a legal identity just like a company
• If you are an LLP, the contacts should be signed under your business.
• It helps you to gain the trust of your stakeholders
• It also gives your customers and suppliers confidence in your business

(ii) Limited liability of your partners

• Just like the name, you, as a partner or your partners, have limited liability
• It is based on the contributions that they make
• This means, the partners are liable to pay only the amount of contribution
• Moreover, they are not responsible for any loss in the business.

(iii) Low cost and less compliance

• Yes, you heard it right. Firm registration of LLPs is lower than public or private limited company
• You have to follow low compliances
• You need to file two returns annually: (a) Annual Return and (b) statements of accounts and solvency

(iii) No need for minimum capital contribution

• Any LLP can be formed and registered without a minimum capital
• You don’t even need to have a minimum paid-up capital before incorporation

What is the process of firm registration in India?

If you have read so far and are thinking about the process of firm registration in India; this is how it is done. For partnership firms:

1. Application for Registration

• You need to fill in Form 1 to the Register of Firms where your business is situated
• All you need to remember is that you can obtain this from the Register of the Firms office. You can also download it from the website (Register of the Firms)

The form must contain the following information:

• Name of your firm
• The main place of business of the firm
• Any other location (if applicable) where the firm is carrying on business
• The date of joining (of your every partner)
• The names and permanent addresses of all the partners
• Duration of this firm

2. The name of the partnership firm must be selected

You can give any name to your firm. But you need to keep in mind a few aspects:

• The name of your firm should not be very similar or identical to any existing firm in the same business
• The name of your firm must not have words like crown, emperor, empire and so on.
• It should not have names that display sanction or approval from the government

3. The certificate of registration

• The registrar must be satisfied with the documents and the registration application
• After this, your firm will be registered in the Register of Firms
• A registration certificate will be issued after this.

If you are an LLP and planning to opt for firm registration in India, the following steps are for you:

• You need to obtain a DSC (Digital Signature Certificate)

• A DSC for every designated partner needs to be obtained
• Please remember that LLP filings take place online on the Ministry of Corporate Affairs portal
• A DSC ensures partners can sign and validate all the documents securely
• If you are thinking of the cost, it depends on the certifying agency.

• Application for DPIN (Designated Partner Identification Number)
• You need to apply for the DPIN of all the designated partners

• It is also applied to the intending to be designated partners for the proposed LLPs

• In the Form DIR-3, the applicant must make the application for allotment of DPIN.
• Once done, you need to attach the scanned copy of documents (generally, you have to give Adhaar and PAN) to the form.
• A secretary of the company or a full time practice Chartered Accountant or Cost Accountant has to sign this form.
• Lastly, keep in mind that only humans can be designated partners of an LLP. So, the DPIN is obtained by people and not by entities (such as LLP, OPC, company, and so on).

• The Approval of the name

• In this step, you need to file a Reserve Unique Name-Limited Liability Partnership (RUN-LLP)
• This is for the proposed LLP, which can be processed by the Central Registration Centre.
• However, before opting for this process, you can conduct a free name search on the MCA portal
• This system gives a list of names (similar names of existing companies/LLPs based on the searched criteria.)
• The register approves names that are not acceptable in the opinion of Central Government of India
• Here, they allow a resubmission of the form. You should give it within 15 days to correct the defects.
• In firm registration, you can propose 2 names of the LLP.
• You need to apply for LLP incorporation within 3 months of the date of name approval from the MCA

4. LLP Incorporation

• Here, you need to fill out the form Fillip (Form for incorporation of Limited Liability Partnership)
• You need to fill it with the register of jurisdiction over the state where the LLP is situated. You need to remember that it is an integrated form.
• The fees you pay here, as per Annexure “A”
• This helps you to apply for the allotment of the DPIN of an individual. The company needs to appoint this person as a designated partner and this person must not have a DPIN or DIN.
• Only two people can make the application for allotment
• You can make the name reservation application through Fillip also
• If the name you have applied for is approved, then it is reserved. You can file it as the proposed name of the LLP.

Final thoughts

So, to sum up our discussion, firm registration is beneficial for Indian businesses. This gives legal recognition to your business. Also, it helps in increasing trust and transparency for your business. The process is not very complicated and doesn’t take much time to get registered. What are you waiting for? Get your firm registration today.

FAQs

1. What are the Fees for firm registration in India?

The fees required for firm registration in India vary from state to state.

2. How long does it take for Firm registration in India?

Firm registration in India typically takes 7–15 working days, subject to government processing.

3. What are the benefits I can get after Firm registration in India?

There are many benefits of firm registration in India. Among these, the important ones are:

• Legal recognition
• Credibility
• Access to government schemes

Disclaimer 

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.