A partnership deed is one of the most important documents and it is important for one to know the basics of partnership deed.
A partnership deed is also known as a partnership agreement, a written document among individuals or partners looking forward to doing business together to start a business. Indian law offers different opportunities to entrepreneurs.
Partnership companies are ideally one of the most preferred choices among all entrepreneurs considering the benefits it brings. But learning a business in partnership is easier said than done, and it includes a lot of risks besides planning like disagreements, conflicts money which can often lead to fallout; it is always good to sign a partnership deed before embarking on any new journey and investing the savings and efforts towards starting a new venture.
A legal practice can help protect the interests of all the parties involved in the partnership business. You are at the right place if you are looking forward to starting a partnership business. You can learn the basics of partnership deeds here.
What Do You Need To Know About A Partnership Deed?
A partnership deed is a legal document where at least two or more people come together to run a company. The document includes all the important terms and conditions related to the business, like the profit and loss obligations, admission of a new partner, salaries exit process, etc. document plays a crucial role. If a company ever goes to court for some reason, this document will work as proof.
A partnership deed is also prominently termed a partnership agreement, registered under the Indian Registration Act 1908. The best part about this deed is that there is no risk of being destroyed in the partner’s possession. Furthermore, the partnership deed registration offers amazing benefits like the company being eligible for PAN card bank account opening and helping obtain the GST certificate.
What Are the Elements of A Partnership Deed?
The partnership deed can protect a person’s interest if there is any dispute or confusion over any specific matter. Furthermore, the deed should ensure all the legal elements that are related to the company. Even though there is no format standard for drafting the deed to provide you upgraded understanding of the elements that are already equipped with the list of the data present in the partnership agreement.
Executing a Partnership Deed
A non-judicial stamp paper having a value of at least Rs.100 must be used to print a partnership agreement depending on the number of assets held by the partnership firm registration. Each partner would keep a signed original for their records, and the partnership agreement is often signed with all of the partners present. Each partner keeps a duplicate or three copies of the signed partnership deed once it has been witnessed and signed by all partners.
A Partnership Deed Will Include the Following
Partnership Purpose
It includes the name and address of all the partners besides the important details to explain the business type undertaken by the partners.
The Principal Location of the Business Partnership
The company will operate from the site, and the partners will determine the same from time
to time.
Duration of Partnership
The deed should include the deed of establishment of the company and the deal term.
Contribution of the Capital
The contribution of the capital property cash goods or services in the value agreed upon.
Capital Withdrawal
It includes the details of the withdrawal policy permitted to all the partners and if the company pays any interest on such withdrawal.
Salary and Commission
It includes the details of the percentage of the salary ratio to the partners.
Profit and Loss Ratio
Profit or loss to be approved that is to be borne by the partners.
Regulation for the Dissolving of the Partnership
Details of the company’s account and how it would be treated if any partners resign or the firm is dissolved.
Rules for Admitting a New Partner
It includes the details regarding the admission exit or retirement of a partner. In the future
guidelines to be followed,
you have to mention some guidelines that need to be followed if any of the partners goes bankrupt.
Audit an Account Details
Accurate and complete books of account of the company’s transactions should be made available at all times for open inspection and examination by the partner.
Voluntary Withdrawal of a Partner
Some rules for voluntary withdrawal should be mentioned in the partnership deed.
Partner Duties
It mentions the roles and responsibilities of all the partners.
Banking and Partnership Fund
The funds held in the company’s name should be placed jointly in the partners’ bank accounts.
Borrowings
The written consent of all the partners should be required for taking the loan from a financial institution, bank, or any third party of the company’s financial requirement.
What Are the Benefits of a Partnership Deed?
A partnership deed can also be in an oral or written format. You should always have it in a written format because the oral format has a drawback. After all, this does not feature any value for taxation purposes. Additionally, you cannot use it if there is some legal dispute among the partners.
- The best part about having a partnership deed is that it allows the business owners to file a legal suit if there is any dispute. It also helps avoid all misunderstandings or conflicts among the partners as all the terms and conditions are pre-decided and mentioned in the agreement.
- It also outlines the duties of all the partners.
- The agreement offers the details of the profit and loss ratio and minimizes the chances of misunderstandings.
- It includes the amount invested by all the partners in the business.
What Are the Charges of Partnership Deed Registration?
The partner involved in the business needs to pay some registration charges for the partnership deed. Besides that, stamp duty charges will likely vary from one part of the country to another. Even though having a partnership deed is not compulsory, it is advisable to get it as it helps you regulate all the business partners’ rights, liabilities, and duties.
You should have a partnership deed if you want to run your partnership business successfully. This deed makes things easy for you, so you must ensure it’s in place on time.
Conclusion
If you want assistance from the experts in helping you build a strong partnership deed with is legally bound, then indeed Vakilsearch is the best option. The experts here leave no stone unturned in providing the best services at affordable prices. Moreover, you can reach out to them whenever, and they will be there to help you out.
