Partnership Firm Registration and Draft Partnership Deed: A partnership deed is a name given to an agreement between partners of a firm that summarises the terms and conditions of the partnership. It specifies several titles like profit or loss sharing, interest on capital, salary, admission of new partners, etc.
- Governing Law
- What is a Partnership
- Modules of Partnership
- Registration Process
- Additional Clauses
- Partnership Deed Registration in India
- The procedure for Registration of Partnership Firms
- On the Occasion of Retirement of a Partner
- Key Points to Remember
- Format of Draft Partnership Deed
- Deed witness
The Indian Partnership Act of1932 came into force with effect from 01.10.1932 and extended to the entirety of India, excluding the state Jammu and Kashmir.
What is a Partnership
As per The Partnership Act of 1932, a “Partnership” is the firm between persons who share the profits of a business.
Modules of Partnership
Individuals who have agreed to enter into a partnership are called “partners”, and collectively they are called a ‘firm’. The name of their business is called the ‘firm name.
Partnership Firm Registration and Draft Partnership Deed Registration Process
Reason to set-up:
- Relatively easy to set-up
- The number of statutory compliances are relatively more minor.
- Selecting Partnership Firm Name
- Creating a Partnership agreement, which may be oral or written. However, verbal contracts do not have any value; therefore, agreements should be in written format.
Essential characteristics of a partnership deed:
- Name & Address of the firm and all the partners
- Type of business
- Date of Beginning of business
- Period of Partnership
- Contribution of Capital by each partner
- Profit-sharing ratio amongst the partners
Partnership Firm Registration and Draft Partnership Deed Additional Clauses
- Interest in Partner’s Capital and Interest to be charged on drawings.
- Commissions or Salaries payable to partners
- Process of preparing accounts and audit
- Division of responsibility such as the duties and obligations of all the partners.
- Instructions to be followed in the case of retirement, death and partner’s admission.
- The Partnership Deed should be on official stamp paper according to the Indian Stamp Act, and every partner should keep a copy of the Deed.
- The partnership should file a Replica of the Partnership Deed with the Administrator of Firms in the case of registration.
Partnership Deed Registration in India
As per the Partnership Act, registering a Partnership Firms is totally optional and depends on the partners.
If the partnership deed is unregistered, they may be unable to enjoy the benefits of a registered partnership.
Registration of Partnership can be done before opening the business or during the extension of the partnership. However, registration should be done before the firm proposes to file a court case to enforce the contract rights.
Procedure for Registration of Partnership Firms
- An application consisting of the prescribed fees is needed to be submitted to the ROF or Registrar of Firms in the State’s original location.
- The following documents need to be submitted besides the application:
- Application for Partnership Registration
- Duly filled sample of Affidavit
- Certified Copy of the Partnership Deed
- The ownership proof of the principal place of business or lease agreement thence.
The statement or application must be attested by each of the partners of the firm or by their agents. Once the registrar is contented with the points stated in the partnership deed, he will record an entry of the statement in the ROF or Register of Firms and publish a Certificate of Registration.
It is compulsory for all firms to apply for the Firm Registration with the Income Tax Department and get a PAN Card.
After gaining a PAN Card, the Partnership Firm will be needed to open a Current Account in the Partnership Firm’s name and control all its operations through the specified Bank Account.
On the Occasion of Retirement of a Partner
- A partner might retire
- After earning the consent of all other partners
- In accord with an express agreement by the firm partners
- The partnership is willing to provide a notice (in writing) to all the other partners and inform them of the individual’s intention to retire.
Key Points to Remember
- A Partnership firm need not file its yearly accounts with the registrar of the firm every year, unlike an LLP or a Company.
- Partnership firms have their profits taxed at 30% with additional Cess.
- Indian Citizens living in India can be Partners in a Partnership Firm together with minors (to enjoy the profits of the partnership).
- The business can transfer the share of a Partnership to any alternative person after obtaining the agreement of all the partners involved in the partnership.
- The transferability of a Partnership is inconvenient. Partnerships can be transformed into an LLP or any Private Limited Company.
- Partnership firms and their Partners are not considered discrete legal entities, and neither is the partnership’s existence perpetual.
Format Of Draft Partnership Deed
This Action of Partnership is executed on the day of (date) of the year (year) by and amongst
- (enter) S/o (enter) R/o.(After this mentioned to as the party of the first part);
- (enter) S/o (enter) R/o (in the following aspects of the document is the so-called party of the second part).
While the parties as mentioned above plan to carry forward the business in partnership by the name, and the style of (insert name of the firm) according to this Deed of Partnership.
If all the parties as mentioned above herewith wish that the terms and conditions be abridged in writing to omit any unnecessary disputes and confusion, if any, that may arise in the future.
- The partnership business should be carried forward under the same name and style of the name of the firm.
- According to this Deed, the business of the partnership firm (enter Business object)or any additional business may be marked from time to time mutually by every firm partner.
- The Head Office of the partnership firm will be situated at (enter address of the firm).
- The primary place of business is allowed to be shifted to any other site or area as per the partners’ unanimous decisions from time to time.
- Any branch can be opened under any unique name and style at a place or place, as the partners may resolve from time to time.
- The terms and conditions of the partnership should be considered to have been started with effect from the (insert date) day of (insert month), 20 (insert year).
- The investment required for the partnership should be contributed by all the partners as jointly agreed upon between the partners.
- The partnership should preserve the regular books of accounts of the particular partnership at the place of a business that is to be closed on (insert day and month)each year. Every firm partner shall have admission and power to hold copies of the same.
- All transactions as entered into the book by them on behalf of the partnership should be authentically noted.
- At the close of each accounting year, the partnership’s accounts should be drawn up, and the Account of Profit & Loss and the Balance Sheet of the business should be prepared. The Profit or losses falling to the segment of each partner should be credited or debited to the individual accounts.
- Any two partners should duly sign the Profit or Loss Account and the Balance Sheet.
- The Profits and Losses according to the Profit and Loss Account of the partnership business should be divided amongst all the partners as under:
- (Party of the First part)
- (Party of the Second part)
- Any of the partners should control the bank account(s) of the partnership to this deed or as may be jointly decided from time to time.
- No partner, without the inscribed consent of all the other partners, should do or aid in undertaking any of the following acts:
- Selling, mortgage, assigning or otherwise transferring their interest or share in the partnership business or possessions.
- Charging, mortgage, speculating, assigning or otherwise transferring the business, possessions or rights of the partnership firm.
- The partnership should be formed at will and can be dissolved at will with the joint consent of all the parties to this deed.
- All the parties to this deed should work meticulously and faithfully to the mutual advantages of the firm and should render correct information to each other.
- Any agreement or difference that may arise between the partners and/or their legal heirs, inheritors or representatives with regard to the meaning, construction, and effect to this deed and/or parts thence or in accordance of the accounts, the profits or losses of the business of the alleged firm or any other matter relating to the firm should be stated as adjudication as under the Indian Arbitration Act of 1940.
- The provisions of the Partnership Act of India 1932should be applied with regards to matters and not expressly provided before in this partnership deed.
- Any of the terms mentioned above, any condition and stipulations may be changed or varied or added to by jointly taking the accumulated consent of all the partners (in writing).
- Every business expense should be borne by the whole Partnership Firm.
- The authorities and duties of the Partners of a firm, which should be exercised at their sole decision with mutual consent (written or verbal) from partners, should include below:
- To convert the partnership Firm to LLP or Private Limited or Limited Company, as and when a Partner chooses to do so.
- To acquire, takeover, purchase, and/or combine businesses or undertakings of different companies or firms which, under the existing circumstances, from time to time, can conveniently or favourably be combined with the main business of the firm, to join or merge with those companies whose businesses are acquired, taken or purchased over and/or to enter into an agreement with the object of procurement of such undertaking and/or business.
- To go into the acquisition, takeover or purchase and/or combine any other entities or vice versa depending upon the time when the Partner chooses to do so.
- Sell, mortgage, lease or assign and in any other method feel with or dispose of the partnership or properties of the partnership or any part thence, whether portable or permanent for such consideration as the partners of the partnership may think suitable.
- Sell, mortgage, lease or assign or dispose the properties or assets of the firm (with movable or immovable) to any company or another object at jointly agreed amounts by the partners.
Note: The firm may follow the points mentioned above but it is not limited to them.
- The wealth required for the business purpose of Partnership should be contributed by the Parties from time to time in such a way that, in all respect, the agreement remains solid between partners. A simple 12% rate of interest per annum should be paid by the firm to the respective parties.
- It is to be noted that any partner is permitted to draw salary, remuneration and/or commission for being employed in the partnership firm as decided upon between the partners.
- Businesses should note that the books of accounts and any other documents belonging to the partnership should be kept at the location of business only and should, at all practical times, be accessible for inspection by any such parties or the company’s own authorized agents.
- The written consent of each and every Partner will be needed for the partnership to gain credit facilities from any such financial institution.
- The subjects for which not any provisions have been made for this deed may be marked upon by joint consent of the parties (in writing).
- Unless provided before, the provisions of the Act on Indian Partnership of 1932 should be applied.
- In witness where the parties in the annex to this regulation have set and promised their hands on the day, calendar month and year as mentioned above.
- Witnesses 1and 2
- Executants: Parties of the First and Second Part.