Civil Procedure Code (CPC)

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Dinesh Kumar C me17b108   07 June 2021

Partnership for performing trading

Hi, I and my friend are performing trading in our two separate personal accounts. We would both like to share the profits equally among each other, by forming a partnership. Can we do so by reporting the net profit generated in both personal accounts as the income for the partnership and then pay taxes for the same and then split the profit among ourselves.
Also, we do not want to use the business account of the partnership for connecting with the trading app, we want to continue to use our personal bank accounts for the same, and would like to transfer all the profits generated to this business account at the end of the tenure for taxation purposes.


 5 Replies

T. Kalaiselvan, Advocate (Advocate)     08 June 2021

partnership firm can invest in shares market but cannot hold shares in partnership firm's name. Partnership firm can't be a share holder for any company. ..

. You can make a partnership firm by deed of partnership and then open Demat on name of firm and then indulge in trading.

A Partnership firm cannot be a member of a Company.

The membership has to be in the name of the partners of the firm.

There is a clarification from the Department of Company Affairs stating that "a firm, not being a person cannot be registered as a member of the Company except when the Company is licenced under Sec 25 of the Companies Act, 1956.

Partnership firm can not become member of the company as it does not have a separate legal status like company.

But Demat account can be opened in the name of the partners and broking account can be opened in the name of partnership firm.

Partners can unanimously appoint authorised partner who will issue instructions to broker for purchasing and selling the shares.

For this purpose Partnership PAN no. should be given.

So the main answer is yes partnership firm can invest in shares market but cannot hold shares in partnership firm's name.

Sankaranarayanan (Advocate)     08 June 2021

Are your partner ship firm is registered?

how long you doing this business?

Once a Firm registered then you need to open a account in the name of the partnership firm.

The firm should  be using its own account and not using  partner's individual account.

Better to seek local chartered accountant and act accordingly

 

Dinesh Kumar C me17b108   08 June 2021

Resepcted sir,

The issue here is that my personal keeps receiving referral income as a part of the referal program in the trading app.

So, apart from what the business account is earning in the form of trading, I am receiving an extra income in my personal account in the form of income, which ideally should belong to Business Account Profits.

Can I transfer the money in my personal account to business account and tax it under the partnership rather than as my own personal income?

T. Kalaiselvan, Advocate (Advocate)     08 June 2021

a Referral Program offered by a stock-broker is a No-Investment business opportunity where you can earn cash in form of a percentage or a flat fee for referring anyone to the broker who is interested in trading using their services.

You can also refer anyone whether friends and family member or your colleagues or even acquaintances and anyone who is interested in investing money through the broker for whom you are working.

If the firm is able to sell any product and services to the client, you get a percentage on the revenue generated. 

From the above context it can be construed that the income received by you as per the referral program, becomes your personal income and it can be reflected in your income tax returns as income from other sources, for which yo need to pay the income tax accordingly.

In the given circumstances you have no reasons to transfer this income to your business account, if you do so then it becomes your investment in the business.

 

Dr J C Vashista (Lawyer)     09 June 2021

Partnership account and personal account has to be maintained separately, accordingly both the accounts shall be taxed as applicable.  


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