Regular partnership firm trading (f&o) & investment

[Akshat_M]

Hi @nithin

I have a query with respect to partnership formation and legal requirements

I want to open a partnership where I can Invest and also trade (f&o) in stock market

Contributions will be from me and my brother… We might show loans from Dad and Mom

Fund will be used to invest in share, mutual fund, purchase of gold.

We will pledge those to trade in derivatives

Issue / Query

1. Can we open a partnership account for the above reason

Investment as our objective
Or can we use some other objective and also show investment objectives in it.

2. Will NBFC registration will be required.

100% revenue and asset is a financial income and asset. (50:50 rule criteria is getting fulfilled).

I know only company registered under companies act can become a NBFC. But there in FAQ ( RBI SITE) there is a question that indicates on unincorporated (proprietorship/partnership). I was not able to understand that clearly.

3. Use of profit

Against expenses relating to trading like software, rental,etc
Salary to working partner
Interest to parents for Contributions (ok in form of loan) from there end in our firm

Note:

We will not use anyone else fund except our own money.

[nithin]

Have you checked this thread

Trading F&O via LLC or Pvt Ltd

Hmm… we have discussed earlier in the thread that if you setup a company only with the purpose of trading, you will end up needing to take an NBFC license. A company or limited liability partnership (LLP) is created with those wanting their money to be managed being shareholders or partners. Their pooled funds are then used as trading capital. There are a couple of issues with this. Firstly, an LLP with the objective of investing or trading is not allowed, so people use an alternate objecti…

Btw for the purpose you have stated, that is your own money; partnership should be okay. The objective for the partnerhsip, maybe speak to your CA about this.

No NBFC registration for partnerships.

@Akshat_M

Against expenses relating to trading like software, rental,etc
Salary to working partner
Interest to parents for Contributions (ok in form of loan) from there end in our firm

Yep, this should be possible.

[horizon]

@nithin So, we can conclude that, with 20 Members partnership firm (Max allowed numbers in partnership firm) we can start F&O trading without having 50-50 Audit test right.

Please suggest. .

[Sumit_Lehri]

@ZerodhQna i read that partnership firm cant hold shares in its name…So can we invest in share by having partnership firm?

[Meher_Smaran]

Yes, you can invest by having a partnership firm.

As a partnership firm is not a separate legal entity, one can’t buy shares in the name of the firm but a firm can hold the shares of the Company in the names of its partners either individually or jointly

@Quicko please correct me if my understanding is incorrect.

[Royal]

@Meher_Smaran , @Quicko If i manage other peoples money , can they share profits in my account if i have a Partnership firm or is LLP is better option ?
Partnership or LLP which lower tax structure ?

[Quicko]

Hey @Royal,

With regards to taxation, the tax rates for both partnership firm and LLP are same. The income earned is taxed at a flat rate of 30%. Moreover, if the income exceeds ₹1Cr, a surcharge of 12% will also be applicable.

Hope this helps!