Accounting for a partnership firm
A partnership firm owes nothing to the Registrar of Companies, which removes the uncapped late fee that catches companies and LLPs. What it does owe is its own income tax return as a separate taxpayer, GST and TDS where they apply, and an audit once turnover crosses the threshold. The part most often got wrong is partner remuneration, which is deductible only within limits and only if the partnership deed actually provides for it.
What applies to you
The rules that apply because of how you are registered.
No ROC filings at all. A partnership firm is not registered with the Registrar of Companies. The ₹100 per day per form fee does not apply to you.
The firm files its own return. A partnership is a separate taxpayer from its partners. The firm's return and the partners' returns are different filings.
Partner remuneration has a ceiling. Salary and interest paid to partners are deductible only up to the limits in the Act, and only where the deed provides for them. Anything above is disallowed and taxed twice in effect.
Audit above the turnover threshold. A tax audit applies once turnover crosses the limit. Below it, no audit.
GST and TDS apply as normal. Registration once you cross the threshold or supply across state lines. TDS from the point your turnover makes you liable to deduct.
Your deed is the rulebook. Profit sharing, remuneration and interest all follow it. A deed that has not been updated in years is a live risk.
What we do about it
What we take over.
Books every month. Including each partner's capital and current account, kept properly rather than settled by argument at year end.
The firm's income tax return. Prepared from closed books, with remuneration and interest computed within the limits.
GST and TDS. Filed on schedule, with your approval before each submission.
We read your deed. And tell you if what is being paid does not match what it allows. This is the check almost nobody does.
Notices handled. Forward it on WhatsApp. Routine notices are inside the fee.
No Registrar, no uncapped fee. The exposure here is in the tax computation, not the calendar.
Questions
What people in your position ask.
Does a partnership firm file with the ROC?
No. A partnership firm is not registered with the Registrar of Companies and files nothing there. That removes the ₹100 per day per form additional fee entirely, which is the single biggest compliance cost difference between a firm and an LLP.
How much can we pay ourselves as partners?
As much as you like commercially, but only a limited amount is deductible for the firm, and only if your partnership deed provides for it. Pay above the limit and the excess is disallowed in the firm's hands while remaining taxable in yours. We compute the allowable figure before it is paid, not after.
Do we need to register the partnership?
A partnership can operate unregistered, but an unregistered firm cannot enforce its contracts in court in the same way, which becomes a real problem in a dispute. That is a legal decision rather than an accounting one, and worth taking properly.
Is a partnership taxed better than a company?
Sometimes, and it depends on how much you take out and how. A company pays corporate tax and then you are taxed again when you take money out. A firm's profit is taxed once at the firm level, and partner remuneration is deductible within limits. We will show you the comparison with your own numbers rather than a general answer.
By business structure
Not quite you?
- Private Limited
The heaviest compliance load, and the one with the uncapped late fee.
- LLP
Lighter than a company, but the uncapped ROC fee still applies.
- One Person Company
A company in every way that costs money, with a lighter annual return.
- Proprietorship
You and the business are one taxpayer. Simplest structure, easiest to neglect.