Let us now take a closer look into the meaning of a partnership deed, the format of a partnership deed, its significance, and the various clauses attached to it.
Business Partnership Agreement – When two or more two people come together and create a new business entity, they enter into an agreement known as a partnership, and when this agreement is put down in the form of a written contract, that agreement is said to be a partnership agreement.
Meaning of a Partnership Agreement
A written legal agreement that stresses the rights and control of a partnership firm’s members, making the division of profits and losses, as well as other major decisions and their ramifications, crystal clear to each partner.
Important Details to Be Included in the Partnership Agreement
The following are the main characteristics of the partnership deed: –
- Name and Address of the Partnership and its Co-Owners– The partnership deed must contain the name by which the business will operate in the future.
- Name of the Owners and their Addresses- The deed must also contain the names and current addresses of all the partners.
- Nature of the Business– The partnership deed must also clearly mention the type of business proposed to be undertaken.
- Address of the Firm– The partnership deed must mention the location of all its offices and its head office as well.
- Commencing Date and Place – It should also clearly indicate the time and place of commencement of the business.
- Duration of the Business– The deed also contains the time duration of the partnership, whether it be indefinite, for a fixed period, or a project.
- Capital provided by owners– The deed must contain the amount of capital each owner has contributed.
- Profit-sharing ratio- It should also mention the ratio of a division of the profits earned concerning each partner.
- Audit details– The procedure of audit that will be conducted is to be mentioned in the deed.
- Admission and retirement or death of the partners– Rules referring to the addition, termination or resignation or death of any partner in the firm must be written down in the deed.
- Rights and responsibilities of the partners– The deed must also include all the rights enjoyed by the partners and the various duties to be undertaken.
- Settlement of accounts– the deed shall also enumerate the way of settlement of accounts in case the firm undergoes dissolution.
Why Should a Business Partnership Agreement Be Created?
Being written in nature, a partnership deed is more reliable than any oral agreement. The significance of a partnership deed can be summarized in the following points: –
- Being legal, this document provides well-defined guidelines and rules for carrying out the agreement of partnership.
- Due to its precision in stating all the necessary information, a deed minimises confusion.
- In cases of the settlement of any dispute, the deed makes the procedure of events simple.
- The precise yet clear nature of the document makes the roles of each of the members of the firm clear and unambiguous.
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Advantages of Registering a Partnership
There are many benefits associated with getting a Business Partnership agreement firm registered: –
- Right to File a Case– A registered firm automatically receives the right to file a lawsuit regarding any dispute.
- The Protection of Interests– In case of any disputes among the partners, a registered firm and its owners can rightfully claim their settlement.
- Protection from Creditors, Investors– A registered property is safe from creditors in case of debts if the company duly maintains its records.
- Protection of Business and Production– All registered firms enjoy the benefits provided by the government as they are registered under the government.
- Bank Loans– Registered firms receive credits and loans from banks quickly due to their legalized nature.
Documents Required for Registering the Agreement
Following is the list of documents required for registering the Partnership Deed with the Sub Registrar-
- Identity Proofs of the partners
- E-stamp paper of the prescribed amount
- Registration fee
- Aadhar numbers of all the partners
- Two Passport-sized photos of each business partner
Steps Involved in the Drafting of a Partnership Agreement
Here is a guide on the step-by-step process of drafting a Business Partnership Agreement: –
- Draft the Agreement- The partners need to draft the agreement providing all the relevant details of the firm and its partners. Refer to the clauses mentioned above.
- Get the e-Stamp Paper- Partners must then purchase the e-stamp paper of the prescribed amount and get the deed printed on it.
- Sign the deed– Then you must get the signatures of all the partners on all the pages of the act accepting the rules and regulations.
- Get the deed attested by Notary or get it registered– It’s up to the partners whether they want the deed to be attested by a notary or they want to get it registered.
The aforementioned steps are a simplified version of the actual complex procedure involved in drafting and registering a partnership deed. Get in touch with our experts today to ensure the hassle-free commencement of your partnership!
- Preparation of Final Accounts of Partnership Firm
- Nature of Partnership Firm
- Provisions of the Indian Partnership Act 1932 in the Absence of Partnership Deed