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Author: Associate Debasmita Patra

Refer our previous article – “Partnership Deed Format & Registration Process”

A partnership deed is an agreement that the parties to a partnership business enter into that outlines the rights and responsibilities of all the parties involved, in details. This document is enforceable by law and serves the purpose of guiding the partners in the conduct of the business. Such an agreement is entered into so that there are less or no discrepancies and mismanagement of the partnership firm.

The registration of a deed of partnership is made under the Indian Registration Act,1908, to prevent the destruction or mutilation of the deed in possession of the partners.

CONTENTS OF A PARTNERSHIP DEED:

·      The name of the business or firm, the address of its main office or place of business, the details of the partners, in brief, are also contained in the partnership deed.

·      The deed contains all critical financial information or details of the partnership firm as in the capital to be invested by each partner, shares to be owned by them and even the distribution of profits and disbursement of salaries to the partners.

·      The deed between the partners must also provide for the agreed and accepted procedure of handling accounts for cash flow, profit or loan, even the assets and liabilities of the company so formed. Additional capital, if raised, must also be mentioned in the deed.

·      The date of commencement of business is one of the essential contents of the deed of a partnership firm. It must also make a mention of the duration of such a partnership, if for a fixed project or time period.

·      The document also provides for actions to be taken in case a partner withdraws voluntarily or dies since in such cases, there has a revaluation of the assets and liabilities to be made and shared among other partners. In case one of the partners goes bankrupt or proves to be a detriment to the business or any other activity demanding court action, the actions to be taken further must also be mentioned in the deed.

·      Finally, the methods by which the partnership will be divided, and the settlement of accounts thereon have to be included in the deed itself.

The purpose of a partnership deed is to prevent the partner of the business from seeking court action unless dire.

HOW IS PARTNERSHIP FIRM REGISTERED IN INDIA?

The partnership firms in India, are governed by the Indian Partnership Act, 1932, though, it's entirely upon the discretion of the partners whether to register the firm or not. However, registration of the partnership comes with brighter benefits and easy legal exposure.

Registration can be conducted at any time, be it before starting the business or anytime during its continuance. To begin with, an application is to be submitted to the Registrar of Firms (RoF) of the state in which the firm is located, along with the prescribed fees. The following documents are required to be submitted as well-

o   Affidavit specimen duly filled.

o   Copy of the partnership deed, certified for the purpose.

o   Ownership proof of the office or place of business or the rented or lease.

o   PAN card and address proof of the partners.

Each partner or their respective agents must duly sign the application so filled. The Registrar, if satisfied with the points stated in the deed, shall record an entry of the application in the Registrar of Firms and then issue a Certificate of Registration. Then, a firm is said to be successfully incepted.

PAN card is a mandate for all firms before their registration with the Income Tax department. Having obtained a PAN card number, the partnership firm has to open a current account in its name and handle all the operations through the account.

Format Sample:-

This Deed of Partnership is executed on this the ………day of ………, 20……. by and amongst:- 1. …………………….. S/o ………………………..R/o …………………………………….. (hereinafter referred to as party of the first part); AND 2. ………………………… S/o ………………………………R/o …………………… (hereinafter referred to as party of the second part). WHEREAS the parties above named intend to carry on the business in partnership in the name and style of ………………………………(name of the firm) vide this Deed of Partnership. AND WHEREAS all the parties referred to above hereby desire that the terms and conditions be reduced in writing to do away any avoidable disputes and misunderstanding that may arise in future.