Partnership Deed

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What Is a Partnership Deed?

A Partnership Deed is a document which sets out the terms and conditions of a partnership between two or more individuals. It sets out the nature of the business, the partners' roles and responsibilities, and how profits and losses will be shared.

The Partnership Deed should be signed by all partners, and registered with the Registrar of Companies.

The Different Types of Partnership Deeds in India

  • General Partnership Agreement: A General Partnership Agreement is the most common type of partnership agreement in India. It is suitable for businesses with two or more partners who are equally invested in the business venture. This agreement outlines the partners' roles and responsibilities, as well as their ownership stake in the business.
  • Limited Partnership Agreement: A Limited Partnership Agreement is suitable for businesses with two or more partners where one or more partners have a limited liability stake in the business venture. This agreement outlines the partners' roles and responsibilities, as well as their ownership stake in the business. One or more of the partners may also have a management role in the business.
  • Partnership-in-Commitment Agreement: A Partnership-in-Commitment Agreement is suitable for businesses where two or more partners are committed to a long-term relationship with each other. This agreement sets out the terms of the partnership, including the partners' roles and responsibilities, as well as their ownership stake in the business. The agreement may also include provisions for dispute resolution and dissolution of the partnership.

What to Be Included in a Partnership Deed?

When drafting a partnership firm deed, it is important to include:

  • The business name and registered office address.
  • The names, addresses and occupations of the partners.
  • The duration of the partnership, if it is for a fixed term.
  • The nature of the business and the capital contributions of each partner.
  • The profit sharing ratio between the partners.
  • The duties and responsibilities of each partner.
  • Provisions for dispute resolution in case of disagreements between the partners.

How to Draft a Partnership Deed?

  • Decide what type of partnership you want to create. There are different types of partnerships, each with its own advantages and disadvantages. You'll need to decide which type is right for your business.
  • Choose your partners carefully. Not everyone is suited to being a business partner. You'll need to choose people you can trust and who have complementary skill sets.
  • Write down the terms of the partnership agreement. This is probably the most important part of the process, so take your time and make sure everything is clear and concise. The agreement should cover things like profit sharing, decision-making, and what happens if one partner wants to leave the business.
  • Get professional help if needed. A lawyer or accountant can help you understand the legal implications of the agreement and make sure everything is in order.

What Are the Benefits of a Partnership Deed

  • It creates a clear understanding between the partners as to their roles and responsibilities in the business.
  • It helps to prevent misunderstandings and disagreements between the partners by setting out clearly what is expected of each partner.
  • It provides protection for the partners in the event that one partner dies or leaves the business, by specifying how the business will be managed in such circumstances.
  • It can help to attract investment into the business, as investors will be reassured by seeing that there is a clear agreement in place between the partners.
  • In the event that the business is sold, a partnership deed can help to ensure that all of the partners receive a fair share of the proceeds based on their ownership interests.

Checklist Clauses of a Partnership Deed of a Firm

  • General Clauses: These clauses set out the basic rules and regulations governing the partnership, including the name of the partnership, its duration, its purpose/s, and the location of its principal place of business.
  • Capital Clauses: These clauses deal with the financial aspects of the partnership, including how much capital each partner has contributed to the business, how profits and losses will be shared, and what happens if a partner wants to withdraw their capital from the business.
  • Management Clauses: These clauses outline how the partnership will be managed on a day-to-day basis, including who has authority to make decisions on behalf of the partnership, how disputes between partners will be resolved, and what happens if a partner dies or leaves the partnership.
  • Miscellaneous Clauses: These clauses cover any other matters that need to be addressed in the Partnership Deed, such as confidentiality provisions, non-compete clauses, and dispute resolution mechanisms.

What Are the Documents Required for Preparing a Partnership Deed

There are certain documents required for preparing a partnership deed in India. These documents are:

  • The names and contact details of all partners.
  • A description of the business, including its name, registered address, and business activity.
  • The date on which the partnership will begin.
  • The duration of the partnership (if it is not to be unlimited).
  • The capital contribution of each partner, including any loans or other financial contributions.
  • The profit and loss sharing agreement between the partners.
  • The management structure of the business, including who will have authority over which decisions.
  • The dispute resolution procedure to be used in the event of a disagreement between partners.
  • Any other terms and conditions that may be relevant to the partnership agreement.

Once you have gathered this information and these documents, you can begin preparing the Partnership Deed itself. This should be done with the assistance of a lawyer, to ensure that all required legal formalities are complied with and that the agreement is correctly executed.

Why Vakilsearch?

We provide end-to-end legal support and help you select the right business structure for your company. Our charges are very transparent and we offer discounts on bulk orders. Most importantly, you can reach out to us anytime for any queries or clarification. So, what are you waiting for? Get in touch with us today and get your Partnership Deed done hassle-free!

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