Key Features of a Partnership Firm

No Separate Legal Entity: The firm and its partners are considered the same.

Unlimited Liability: Partners are personally liable for the debts and obligations of the firm.

Ease of Formation: Simple to set up with minimal compliance requirements.

Flexibility: Partners can define their roles and profit-sharing ratio in the partnership deed.

Advantages of a Partnership Firm

• Easy to establish and manage.
• Low cost of formation and compliance.
• Ideal for small businesses and professional services.

Tax Implications for Partnership Firms

• Income Tax: Partnership firms are taxed at a flat rate of 30% on profits. Partners are also taxed on their share of profits.
• No Dividend Distribution Tax (DDT): Profits are distributed directly to partners and taxed in their hands.
• Audit Requirements: Mandatory if turnover exceeds ₹1 crore (or ₹50 lakh for professionals).
• GST Registration: Required if turnover exceeds the threshold (₹20 lakh for services, ₹40 lakh for goods).