1. What is a Partnership Company?
A partnership company in Nepal is a form of business organization where two or more individuals or entities come together to conduct business and share profits and losses. The Partnership Act, 2020 (2076 BS) governs the formation, operation, and dissolution of partnerships in Nepal. This legal framework defines a partnership as “the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”
In a partnership, each partner contributes resources, skills, or capital to the business and shares in its management. The partners are jointly and severally liable for the debts and obligations of the partnership, which means creditors can pursue any partner for the full amount of the partnership’s debts.
2. Types of Partnerships in Nepal
Nepal recognizes several types of partnerships, each with distinct characteristics and legal implications:
2.1 General Partnership
This is the most common form of partnership in Nepal. In a general partnership, all partners have equal rights in management and share profits and losses equally unless otherwise agreed. All partners have unlimited liability for the partnership’s debts.
2.2 Limited Partnership
In a limited partnership, there are two types of partners:
- General partners: They manage the business and have unlimited liability.
- Limited partners: They contribute capital but have limited involvement in management and limited liability up to their investment.
2.3 Professional Partnership
This type of partnership is formed by professionals such as lawyers, accountants, or doctors to practice their profession together. It is governed by specific regulations related to the respective professions.
2.4 Joint Venture Partnership
A joint venture is a temporary partnership formed for a specific project or purpose. It dissolves once the project is completed or the purpose is achieved.
3. Partnership Registration Process
Registering a partnership in Nepal involves several steps:
3.1 Step 1: Draft Partnership Agreement
The first step is to draft a comprehensive partnership agreement. This document should outline:
- Names and addresses of all partners
- Nature of the business
- Capital contribution of each partner
- Profit and loss sharing ratio
- Rights and responsibilities of partners
- Dispute resolution mechanisms
- Procedures for admission and exit of partners
It’s advisable to consult a legal expert to ensure the agreement complies with the Partnership Act, 2020.
3.2 Step 2: Choose a Firm Name
Select a unique name for your partnership. The name should not be similar to any existing business and should not contain words that may be misleading or offensive. It’s recommended to check the availability of the name with the Company Registrar’s Office.
3.3 Step 3: Register with Company Registrar’s Office
Submit the following documents to the Company Registrar’s Office:
- Application form for partnership registration
- Partnership agreement
- Citizenship certificates of all partners
- Recent photographs of all partners
- Proof of address for the partnership’s registered office
The registrar will review the documents and, if satisfied, issue a registration certificate.
3.4 Step 4: Obtain PAN and VAT Registration
After receiving the registration certificate, apply for a Permanent Account Number (PAN) from the Inland Revenue Department. If your annual turnover is expected to exceed NPR 5 million, you must also register for Value Added Tax (VAT).
3.5 Step 5: Open a Bank Account
With the registration certificate and PAN, you can open a bank account in the name of the partnership. This is essential for conducting business transactions.
4. Legal Requirements for Partnership Company Registration
To register a partnership in Nepal, you must meet the following legal requirements:
- Minimum of two partners (no maximum limit)
- All partners must be of legal age (18 years or older)
- Partners must have legal capacity to enter into contracts
- At least one partner must be a Nepali citizen
- The partnership agreement must be in writing and signed by all partners
- The business activities must be legal and comply with Nepali laws
5. Our Services for Registering a Partnership Company
Our firm offers comprehensive services to assist you in registering your partnership company in Nepal:
- Consultation on partnership structure and type
- Drafting and review of partnership agreement
- Name availability check and reservation
- Preparation and submission of all required documents
- Liaison with the Company Registrar’s Office
- Assistance in obtaining PAN and VAT registration
- Guidance on opening a bank account
- Post-registration compliance support
6. Time Taken for Registration of Partnership Company
The time required to register a partnership company in Nepal typically ranges from 2 to 4 weeks. However, this timeline can vary depending on factors such as:
- Completeness and accuracy of submitted documents
- Workload of the Company Registrar’s Office
- Any queries or additional requirements from the authorities
Our experienced team works diligently to ensure a smooth and efficient registration process, minimizing delays wherever possible.
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7. Cost of Registration
The cost of registering a partnership in Nepal includes:
- Government fees: Approximately NPR 1,000 to 5,000, depending on the capital investment
- Legal and professional fees: Vary based on the complexity of the partnership and services required
- Stamp duty: Nominal fee for document stamping
- PAN and VAT registration fees: Nominal administrative charges
It’s important to note that costs may change, and additional expenses may arise depending on specific circumstances. We provide detailed cost estimates during our initial consultation.
8. Relevant Laws and Authorities
The primary laws and authorities governing partnerships in Nepal are:
- Partnership Act, 2020 (2076 BS)
- Income Tax Act, 2058 (2002)
- Value Added Tax Act, 2052 (1996)
- Company Registrar’s Office
- Inland Revenue Department
- Department of Industry
Understanding and complying with these laws and regulations is crucial for the successful operation of a partnership in Nepal.
9. Partnership Practices in Nepal
Partnership businesses are common in Nepal, particularly in sectors such as trading, services, and small-scale manufacturing. Some notable practices and considerations include:
- Family partnerships are prevalent, often involving siblings or parents and children
- Many professional services firms operate as partnerships
- Partnerships are often preferred for their simplicity and flexibility compared to companies
- Dispute resolution mechanisms are crucial due to the close nature of partnerships
- Succession planning is important, especially in family partnerships
10. Conclusion
Registering a partnership company in Nepal offers a flexible and relatively straightforward way to start a business. While the process involves several steps and legal requirements, it provides a solid foundation for collaborative entrepreneurship. By understanding the types of partnerships, registration process, and legal obligations, you can make informed decisions about forming a partnership in Nepal.
Our firm is committed to guiding you through every step of the registration process, ensuring compliance with all legal requirements, and setting your partnership up for success. With our expertise in Nepali business law and registration procedures, we can help you navigate the complexities of partnership formation efficiently and effectively.
FAQs
What are the types of partnerships in Nepal?
Nepal recognizes general partnerships, limited partnerships, professional partnerships, and joint venture partnerships. Each type has distinct characteristics regarding liability, management, and legal requirements.
How many partners are required to form a partnership?
A minimum of two partners is required to form a partnership in Nepal. There is no maximum limit on the number of partners.
What should be included in a partnership agreement?
A partnership agreement should include partner details, business nature, capital contributions, profit/loss sharing, partner rights and responsibilities, dispute resolution mechanisms, and procedures for partner admission and exit.
Can foreigners be partners in a Nepali partnership firm?
Yes, foreigners can be partners in a Nepali partnership firm. However, at least one partner must be a Nepali citizen.
What are the tax implications for partnership firms in Nepal?
Partnership firms are taxed as separate entities in Nepal. The firm pays tax on its income, and partners pay tax on their share of profits. The current tax rate for partnerships is 25% of taxable income.
How is liability shared among partners?
In general partnerships, all partners have unlimited liability, meaning they are personally responsible for the firm’s debts. In limited partnerships, general partners have unlimited liability, while limited partners’ liability is restricted to their investment.
Can a partnership be converted into a company later?
Yes, a partnership can be converted into a private or public limited company. This process involves dissolving the partnership and incorporating a new company, transferring assets and liabilities.
What happens if a partner wants to leave the partnership?
The procedure for a partner’s exit should be outlined in the partnership agreement. Generally, it involves valuing the partner’s share, settling accounts, and potentially redistributing ownership among remaining partners or admitting a new partner.
