In this article, we will discuss how to draft a partnership deed.
Table of Contents
What is a Partnership deed?
A partnership deed is a signed legal document that is required for running a business and shares the profit or loss depending on the situation whatever the amount incurred between two or more persons under mutual consent. A partnership deed helps to guarantee that neither party has a disagreement or a conflict about the partnership’s rules. This partnership agreement comes under the Indian Partnership Act of 1932.
The word “Partnership” is defined in Section 4 of the Partnership Act ( Act X of 1932) as a relation between persons who agreed to share profits of business carried on by all or any one of them acting for all. As per the observation by the Bombay High Court, an partnership requires three elements – (a) an agreement entered into by all persons concerened; (b) distribution of profits of the business; and (c) management of the business by all or any one or more of them acting for all, i.e., mutual agency.
Basically, the word “Partnership” indicates a link or a bond between two or more persons who agree mutually to share their business profits or loss among them or in between them.
Why do we need to make a Partnership Deed?
A partnership is a legal brief that contains the rights and liabilities of a partner who entered into the deed. This deed is to avoid misunderstandings, indicate the specific roles of each and every member, and to settle disputes between partners. Moreover, this partnership agreement also contains clauses that specify the profit and loss remuneration whichever should be paid between partners of a firm.
How does a lawyer draft a partnership deed?
The partnership agreement must be printed on non-judicial stamp paper with a value of Rs.100/- or more based on the value of the properties held in the partnership firm. Generally, this partnership agreement is signed in the presence of each of the partners and each of them retains a signed original for their records in front of an Advocate.
What are the factors needed to form a Partnership Deed?
Each Partner has to prepare a Partnership Deed which should be mutually agreed upon by all the Partners before registering a Partnership Firm. The following are the essential ingredients of a Partnership Deed:—
1. The Name of the Business (to be specified in registration)
2. The date on which partnership comes into existence
3. Nature of the business
4. Names of all partners and their addresses with the capital contribution
5. Duration and periodical review of partnership
6. Division of profits & losses and sharing liabilities amongst partners
7. Rights and duties of partners
8. Interest on capital, drawing, salary, and commission
9. Retirement, death, or insolvency of any partner
10. Acquisition and admission of a new partner
11. Mutual rights
12. Arbitration
13 “Notices”
14 “Books”
15 “Banking” etc
Things we need to keep in mind while drafting a partnership deed:
- Firstly, the firm’s partners will need to provide us with information, such as their names, ages, religions (if they are HUF or not), addresses, and proof of identity.
- Secondly, in line with the firm’s value, a Non-Judicial Stamp document is issued.
- Thirdly, the firm’s partners must to provide a current bank account for their business transactions.
- All the partners must need to declare their specific rights and duties while drafting this partnership deed.
Types of Partnership Deed
Partnership at will
Partnership for a fixed period
Few samples of Partnership Deed
1. Deed for Admission of an Partner
2. A partnership deed among Solicitors and Advocates
3. Deed of Partnership between two persons
4. Deed of Partnership between more than two persons
5. Deed for dissolution of Partnership firm
Procedure for Registering a Partnership Firm
More details of a Partnership deed
Frequently Asked Questions
From a legal point of view, one must make a partnership deed before making any firm or any business
Yes, An Partnership deed is a legal document and a valid contract between two or more persons. The word persons refer to both natural as well as artificial person. In the case of a Hindu Undivided Family, each and every member is considered to be the individual partner.
It took a lot of money transactions for a businessman to manage his or her firm. In order to operate their business efficiently, companies also require their own specialized features. Nowadays, having an online current account saves effort and allows you to finish the banking process at any time and from any location.
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