Urgent - proprietorship and partnership

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Khushboo Maheshwari (Querist)
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23 April 2017 "P" owns a proprietorship concern XYZ from past many years and is doing his business. Now he enters into partnership agreement with "S" and they form a partnership firm with same name XYZ in February 2017. P states that he has transferred all his assets and liabilities to the firm but that is not documented in the partnership agreement. Further the partnership agreement is not registered also. P and S hold 50:50 share in the partnership firm. The queries are as following:

1. Can a proprietorship and partnership have same name XYZ?

2. What are the consequences of non registration of partnership firm?

3. Although P says he has transferred his assets and liabilities but since they are not documented can we consider this deed valid?

4. Does transferring all assets and liabilities of proprietorship concern in partnership means dissolution of the Proprietorship concern (i.e. it cease to exist)??

5. Will the turnover of Proprietorship after its transfer / dissolution be treated as turnover of partnership from February 2017 legally?

Sunil

Sunil (Expert)
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23 April 2017 1) Yes. A Partnership firm is a different entity to a proprietorship concern that is inseparable from its proprietor. Both have different structure of PAN. Proprietor's PAN has P as its 4th character and Firms PAN has F.
2) Non registration of Partnership will make it difficult for the firm to sue legally to recover its dues from debtors while partners can be jointly and severally sued for what firm owes.
3) Transfer of proprietors asset can be done even after incorporating firm and the book value is taken as capital contribution. However their are separate provision for immovable property and capital gains arising therefrom. Liabilities have to be confirmed by the other partner too and a further modification of partnership deed can be done.
4) No. Not until the capital is nil. Then the concern ceases to exist and you should apply for cancellation of all registrations like VAT and shops and establishment etc. However, your professional tax as individual continues as all partners must pay professional tax.
5) The turnover of Firm will be from date it is formed and starts is business. Previous turnover is still taxed to the proprietor and proprietor has to discahrge all dues of VAT etc. it collects and pay income tax.

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