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Partnership Firm

Procedure to Create a Deed for Partnership to Register a Partnership Firm

The article gives a broad understanding of the procedure for preparing a partnership contract.

A partnership agreement or deed also referred to as a partnership agreement, is a legal agreement between two people or more than two when they come together to form and run a company. The deed lays down all the important terms and conditions pertaining to the business. Some of them include the rules and regulations of the business, obligations, employee salaries, exit procedures, entry of new partner/s, the ratio of sharing profit/loss, etc. This document is highly crucial if the partnership firm goes to court for some reason because it can be presented in court as a legal document. The partnership deed registration is done under the Indian Registration Act 1908. The partnership deed registration online/offline is necessary because it is only after registration that the organisation can apply for PAN, open a bank account, and obtain a GST registration or FSSAI license in its name. Read this blog to know how to make a partnership deed

How to Create a Partnership Agreement?

Though there is no standardised partnership deed format for drafting a partnership deed, there is certain information that should be included during the firm registration online.

They have the following:

  • The primary objective of the partnership: The deed should contain the partners’ names and addresses and all other necessary details that will help explain the nature of the business to be done by the partners.
  • The location of the partnership business: It should also contain where the firm will run its operations, i.e., the location/s as agreed upon by the partners from time to time.
  • The duration of the partnership: The partnership deed should also contain the date of formation of the partnership firm and the course of the deal.
  • Contribution of capital: It should also contain the contribution of the firm’s property, cash, capital, goods, or services in the agreed-upon value.
  • Withdrawal of capital: Also, it should contain the details pertaining to the drawing policy allowed to every partner and whether the partner needs to pay any interest to the firm upon such drawing.
  • Details of salary and commission: The partnership deed should mention the details pertaining to the percentage of the ratio of the compensation and commission to be paid to the partners.
  • The profit and loss ratio: The percentage of profit and loss sharing by the partners should also be mentioned.
  • Regulation for dissolving the partnership: Also, details of the account/s of the firm and how it will be treated in case the firm gets dissolved should be mentioned in the partnership deed.
  • Rules for admitting a new partner: Rules pertaining to the admission of a new partner, retirement or death of an existing partner and exit of a partner should be laid down.
  • Rules to abide by The guidelines that need to be followed in case a partner goes bankrupt should be mentioned in the partnership deed.
  • Details of audit and account: Correct and complete books of account pertaining to the transactions made by the firm from time to time should be readily available and should be open to the partners for inspection and examination. The method of preparing the partnership firm’s accounts and the audit arrangements should also be mentioned.
  • Partner’s voluntary withdrawal: Rules pertaining to the voluntary withdrawal of a partner should be stated in the partnership deed.
  • Duties and responsibilities of the partners: The division of roles and responsibilities of the partners should also be clearly stated.
  • Banking details: The funds held in the firm’s name will be kept in a bank account as jointly decided upon by the partners.
  • Borrowings: A written consent from all the partners will be needed for taking bank loans or loans from other financial institutions or third parties to meet the firm’s financial needs.
  • Financial Year: The financial year of the partnership should also be mentioned.

Benefits of a Partnership Deed

Though a partnership deed may be oral, keeping the deed in written form is advisable. One of the disadvantages of having an oral partnership deed is that it carries no value for tax purposes. Neither of the partners can use the oral deed as a legal document if any dispute arises. Some of the advantages of creation of partnership deed include:

  • It allows the business owners to complain to court if a dispute arises.
  • It helps to deal with any conflict or misunderstanding among the business partners since all the terms and conditions have been jointly decided upon and already mentioned in the partnership deed.
  • Also, a partnership deed clearly states the duties and responsibilities of the partners.
  • It also lays down details related to the ratio of profit and loss sharing and lowers the possibility of misunderstandings among the business partners.
  • It also clearly states the amount of investment made by each business partner.
  • It also lays down the salary and commission details paid to the partners if any partner decides to withdraw the capital. The interest that he needs to pay.

Registering a Deed of Partnership: Steps Involved

How to prepare partnership deed: In India, partnerships are governed by the Indian Partnership Act, 1932. According to the Partnership Act, registration of partnership firms is not mandatory and is solely left at the partners’ discretion. Registration can be done before the commencement of the partnership business or later, during the duration of the partnership. However, if the partnership firm desires to file a lawsuit to implement the rights mentioned in the contract, the registration should be done before filing the case.

In India, the process for Registration of Partnership firms is simple. The firm needs to apply along with the prescribed fees at the Registrar of Firms of that state where the firm is located. Other documents that should also be submitted along with the application include a specimen of an affidavit duly filled, a partnership deed’s certified copy, and proof of ownership of the main place of business or the rental/lease agreement.


All the partners or their authorised agents need to sign the application. Suppose the registrar is satisfied with the points mentioned in the partnership agreement. In that case, he will enter the statement in a register and issue a Certificate of Registration. However, it should be remembered that registration with the Registrar of Firms and registration with the Income Tax Department are two separate things. All firms need to apply for a business registration under the Indian Income Tax Department: and get a business PAN card. After getting the PAN card, the business will have to open a current account and carry out all its transactions through this bank account.

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