A partnership firm is a popular form of organisation for starting a new business. It is an association between two or more persons who have agreed to form a lawful business and to share the profits of a business carried on by all or any of them acting for all.
A partnership deed is a written legal document that is designed to guide the partners in the conduct of the business. It indicates the terms on which the firm is founded and an amendment agreement can be added to a partnership deed at anytime to change the terms of a Partnership Firm.
Successful running of business operations is only possible when there is mutual understanding between partners. This requirement is met by drafting of a deed of partnership. It provides a framework of the rights and responsibilities of all partners to a business operation and also provides for the remedial action in case of future disputes. Though issuing a partnership deed is not mandatory, it is strongly recommended for partnerships to have some kind of agreement among themselves, to avoid unnecessary misunderstanding, harassment and unpleasantness among the partners.
A partnership firm can be created by entering into a Deed of Partnership, without registration under the Indian Registration Act, 1908. However, registration will prevent fear of the deed of partnership being destroyed or mutilated in the possession of the partners and enable the partnership firms to obtain PAN, apply for bank loans, open a bank account in Partnership Firm name, obtain GST registration, get business related licenses, and more.
Partnership agreement must be printed on a Non-Judicial Stamp Paper with a value of Rs.100/- or more based on the value of properties held in the partnership firm. The agreement can be made between two or more partners and is witnessed and signed in the presence of all the partners. The signed duplicate copy of the partnership deed is held by each of the Partners.
Some important clauses to be included in a Partnership Deed are-
- Name of the Partnership Firm and names of partners.
- The purpose of business and activities the partnership will be engaged in.
- The time period for carrying on business; a partnership can be perpetual or for a specific term length.
- A complete address of the principal place of carrying out business.
- Types of partners in a partnership; the partner may be an active partner, dormant partner, sleeping partner.
- Capital contributions such as cash, property, securities, assets, etc., that each partner will make towards the partnership firm and the interest on said capital to be paid to partners.
- Duties and obligations of partners.
- The ratio of how profits and losses are distributed among the partners.
- Details of the salary, and commission if any, payable to partners
- When partners may draw from their partnership share and interest if any to be paid by partner, to firm on such drawings
- Non-Disclosure clause to restrict the partners of the firm to not to disclose the information of proprietary business of the firm.
- In what manner the disputes that occur in Partnership will be resolved.
- Process in case of expulsion, admission, death or retirement of a partner
- Accounts and Audit; the financial year of the partnership firm, how the books shall be prepared, the method of accounting to be adopted, etc.
- How and when the partnership agreement can be amended.
To create your own Partnership Deed online-
- Visit our website http://www.thelegalcapsule.com
- Select the pre-drafted template of Deed of Partnership and fill in your details.
- Use our ‘Expert Advice’ option to add or amend clauses.
- Review your document once completed.
- Download and print the prepared document on stamp paper. Or;
Opt to have documents printed on Stamp paper and delivered to an address of your choice.
- E-sign your document using Aadhaar based verification.