MSME Registration in India: A Full Guide

Micro, small, and medium enterprises (MSMEs) are the motivational power of India's economy as they generate a large part of employment, industrial production, and exports. The Government of India has recognized its central role, and hence, MSMEs provide profit and encouragement. MSME registration, now Udyam registration, is required to enjoy these benefits.

Classification of MSMEs

MSME classification is done according to investment in plant and machinery or equipment, and turnover per year:

  • Micro Enterprises: Up to ₹1 crore investment and up to ₹5 crore turnover.
  • Small Businesses: Investment maximum of ₹10 crore and turnover maximum ₹50 crore.
  • Medium Enterprises: Investment up to ₹50 crore and turnover up to ₹250 crore.

These thresholds equally apply to manufacturing and service sectors.

Why Register a Partnership Firm?

Though registration of a partnership firm is not obligatory under the Indian Partnership Act, 1932, it is strongly encouraged because of the several advantages which a registered partnership firm gets:

Legal Recognition: A registered partnership firm enjoys the legal recognition which makes it more trustworthy and credible in the eyes of clients, suppliers, and banks.
Right to Sue: Such a firm, being registered only, can sue or be sued before a court of law. This legal status is important to enforce contractual rights.
Conversion and Expansion: A registered company can be converted into other forms of business such as a Limited Liability Partnership (LLP) or a private company easily, which allows for expansion and growth of the business.
Access to Credit: Registered companies enjoy easier access to credit facilities from financial institutions because of their legal status.
Perpetual Succession: Registration guarantees the continuity of the firm in spite of changes in partnership, including admission or retirement of partners.

Procedure for Registration of a Partnership Firm

The procedure for registration of a partnership firm in India requires the following steps:

1
Select a Unique Name: Designate a unique name for the firm that doesn't violate any existing trademarks.
2
Prepare a Partnership Deed: This is a legal agreement that stipulates the terms and conditions of the partnership, including: The firm's name and address, as well as the partners' names and addresses
  • Nature of the business
  • Each partner's capital contribution
  • Ratio of profit and loss sharing
  • Responsibilities and obligations of partners
  • Dispute resolution mechanisms
3
Stamping of the Partnership Deed: The deed is required to be printed on a non-judicial stamp paper of suitable value, which is different for different states, and signed by all partners.
4
Registration with the Registrar of Firms: File the following documents with the Registrar of Firms in the state where the firm is situated:
  • Application for registration in Form 1
  • Partnership deed filled correctly
  • Affidavit of intention to become partners
  • Evidence of the principal place of business
  • Partner's identity and address proof
5
Payment of Registration Fee: The fee for registration is state-dependent and is determined based on the firm's capital contribution.
6
Issuance of Registration Certificate: On verification of documents, the Registrar will issue a Certificate of Registration, certifying the existence of the partnership firm as a matter of law.

Documents to be Furnished for Registration

To register a firm of partnership, the following documents are usually to be furnished:

Partnership Deed
PAN cards of partners
Address proof of partners (voter ID, Aadhar card, passport, etc.)
Address proof of the firm (utility bills, rent agreement, etc.)
Affidavit for stating intention to be partners
Passport-size photos of partners