How to Convert OPC Company to Partnership Firm in India?

A Partnership firm is termed as a contract between two or more individuals that contribute their skills, money, etc to start a firm. They set up their firm and provide products and services through the firm. A Partnership Firm Registration in India is a mandatory process only after which the company can start its business functions. The partners can start the business operations in a few days after filing for registration.

Aim of a Partnership Firm

The partners play an important role in the creation and success of a partnership firm. Some factors significant while setting up a partnership firm are:

• Profits for partners
• Survival in the competitive market
• Providing quality goods and services
• Acquire more shares in the market

Partnership Firm Registration in India

The registration of a Partnership Firm is mandatory and it is crucial for the individuals to follow the Partnership Firm Registration Process in India, the details of which is laid down in Section 4 of ‘The Indian Partnership Act’,1932.

The registration process of a partnership firm consists of the following steps that are mentioned below:

• Creation of a Bank Account
• Intellectual Property Registration
• Drafting of Documents
• Stationary
• GST Registration

Steps to follow for Registration of Partnership Firm

• Drafting of Partnership Deed
• Notary and Stamping of Partnership Deed
• Filing of Partnership Firm Registration Form
• Filing of PAN application for Partnership Firm

Post Partnership Firm Registration Requirements

• Creation of a Bank Account
• Intellectual Property Registration
• Drafting Documents
• Stationary
• GST Registration Online

What is a Partnership Deed?

A Partnership deed is an agreement/contract that is signed between two partners at the time of the start of the firm.     

It is a written document on the basis of which the partnership firm shall be carried forward. This document serves as proof that the individuals agree to be a part of the company.

Crucial factors of the Partnership Deed

General Information:

• Name and address of all the partners,
• Name and address of the firm,
• Date in which each partner started contributing their capital in the business,
• Details of capital that each partner will contribute in the business,
• Profit/loss sharing ratio amongst the partners.

Detailed Information:

• Interest on capital investment, any loans contributed by the partners to the firm or capital drawn by the partners,
• Duties, responsibilities, and obligations of every partner,
• Right of every partner, that contains certain rights that the active partners will benefit from,
• Commissions, salaries or any other amount to be paid to the partners,
• Procedures or any alterations to be followed on the death or retirement of a partner or dissolution of the firm,
• Other clauses as mutually decided by the partners.

Features for Partnership firm in India

• The minimum number of partners’ compulsory in a partnership firm is two. Without fulfilling this condition, it will not be considered a partnership firm.
• Responsibilities and duties are distributed in an equal ratio amongst the partners of the Company.
• It is easier to start as a partnership firm registration is optional and is not compulsory.
• The legal formalities related to the incorporation of a firm are minimal.
• Fewer Compliances are to be followed by the members of the company.
• A minor cannot work as a partner.
• Flexibility in the decision-making process is available in the case of a partnership firm.
• The initial cost of incorporating the company is Inexpensive as the expenses are equally shared by both the partners.
• One of the major elements of this type of firm is that it has unlimited liability.
• The profit and loss share ratio is a decision taken by the partners.
• The legal status of the company is not different from that of its partners.

  Documents required for Partnership Firm Registration

• Partnership Firm Registration application in Form 1.
• Certified Copy of certified Partnership Deed on stamp paper.
• Sample of Affidavit.
• Ownership documents if the property is owned by the partners.

• If the property is on rent, a rental agreement as proof.
• ID Proof and Address proof of all the partners including PAN Card, Aadhar Card, Driving License, Copy of voter ID/ Passport.

Types of Partnership Firm

The partnership firm has been briefly divided into three types. Each type consists of some features that distinguish it from other types.

• General Partnership firm (GP)
• Limited Partnership firm (LP)
• Limited Liability Partnership firm (LLP)

Benefits of setting up a General Partnership firm

• Ease of incorporation

The partnership firm is created when the partners start functioning and undertaking business activities.

• Less cost of operations

Because general partnership firms are not formed through state filing, they are not supposed to pay a formation filing fee, current state fees or franchise taxes. The partnership must still acquire business licenses and permits required for operations.

• Fewer requirements

The requirement for general partnerships to hold annual meetings of the owners is not mentioned in the Agreement, issue partnership interests, and retain personal assets and keep them separately from business assets. A Partnership Agreement provides a summary of how the supervision of the partnership firm will take place will be taken care of, roles as well as responsibilities of every partner and circumstances which will result in the closure of the partnership firm.

Conversion from One Person Company to Partnership Firm

As per Companies act 2013, Section 2(62), a One Person Company is defined as a company that has only one person as a member.

Types of One Person Company (OPC)

• A company limited by shares,
• A company limited by guarantee,
• An unlimited company

When the paid-up share capital in a One Person Company(OPC) exceeds Rs 50 lakhs and the annual turnover reaches above Rs 2 crores, then it is obligatory for them to convert into a private limited company. During the conversion, the members have to pass a special resolution in the general meeting.

A One Person Company Registration cannot directly be converted into a Partnership Firm but only after its conversion into a Private Limited Company (PLC). Once an OPC is converted into a Private Company, then that private company can be converted into a Limited Liability Partnership (LLP).

Source: https://medium.com/@singhparul/how-to-convert-opc-company-to-partnership-firm-in-india-519f85411e08