• officialsonisvision@gmail.com
  • 7297051181

Partnership Deed

PARTNERSHIP DEED

INTRODUCTION:-

 

The partnership is one of the most common forms of business structure in India. In this minimum of two persons combine their investments, abilities, experience, and other things to start a business. Thus we must tend to study partnership deed and, therefore the registration of such acts. A partnership deed or we can also say a partnership agreement is formulated when the company is formed, primarily, to ensure that partners of a company share a common understanding from each other and the company. Ensuring that partners have an agreement can reduce disagreements later on and will ensure the smooth functioning of the role of partners. The purpose of a written agreement is to protect investments of the partners, ensure that issues related to governing and controls are mentioned in the agreement, defines the obligations and rights of partners. A written partnership agreement will reduce the risk of disagreements, misunderstandings, and disputes between partners of a company.

 

IMPORTANCE OF PARTNERSHIP DEED

 

·         Firstly, without an agreement, the company will have to resort to the default rules of the state. A written agreement allows for partners to have more control of their company and allows them to dictate the rules which would reflect the best interests of the company.

·       Secondly, a partnership agreement includes information on sales and transfer of interests. The written agreement is particularly important, as without it an owner can sell their interests to anyone, including a competitor. The agreement further discusses measures such as the death of an owner and makes provisions for all types of scenarios. The agreement describes in detail if written well who the interests of a company can be sold to or transferred to, to avoid any uncertainty.

·       Thirdly, a partnership agreement will ensure that partners agree on important issues well in advance such as dispute resolution. Partners need to address how to handle disputes if they arise and a dispute resolution clause in the agreement can be helpful in the long run. Dispute resolution such as mediation and binding arbitration in writing can be beneficial to partners and the company if a dispute arises, which would avoid costly and time-consuming litigation. The agreement should also contain a provision if a nonperforming or disruptive partner wants to leave the company and join a competitor's company. The agreement also protects the business, the partner's investment, the minority, and the majority owners.

 

PARTNERSHIP DEED FACTS AND FORMATS:

 

This Deed of Partnership is made at…………………. on this………………day of ……………. between [Name of party 1], [Name of Party 2].

1.      First partner’s name………. aged about…………. years, [son/daughter] of Shri………………., residing at [Address ………………. city, state, Pin code…………………….] hereinafter to be called the First Party.

2.      Second partner’s name………. aged about…………. years, [son/daughter] of Shri………………., residing at [Address ………………. city, state, Pin code…………………….] hereinafter to be called the Second Party.

Whereas, the parties hereto have agreed to commence the business of……………. with its principal place of business at…………………..under the name and style of …………..on the terms and conditions incorporated in the Partnership Deed executed on ……………………

The above is a simple format of how a Partnership Deed recitals have to be made. However, one needs to keep in mind that a Partnership Deed must contain 2 or more partners to start with.

Here are few clauses that must be in the Partnership Deed— 

1.      BUSINESS ACTIVITY

The Partnership Deed must state the business purpose clearly and elaborately. One sample clause can be— “The parties hereto have mutually agreed to carry on the business of ……………………”

2.      PLACE OF BUSINESS

The deed must clearly state the place of business or address of the partnership firm. Generally, it is the place where the business is conducted or the place where the account books are kept. One sample clause can be— The principal place of the partnership business will be situated at ……………………………”

3.      TERM OF THE PARTNERSHIP

There is no limit to the term of the partnership. However, it should contain a restrictive clause stating the termination of the Partnership. One sample clause can be— “The partnership shall begin on…………………………… date, and shall continue until terminated”.

4.      CAPITAL OF THE FIRM

One of the advantages of the Partnership, the firm is that it doesn’t require minimum capital to start with the business. However, it can mention capitals to start with the business. One sample clause can be— The capital of the Firm shall be contributed in cash by the Total Partners Contribution”.

5.      PROFIT AND LOSS

One of the disadvantages of partnership is that the liability is unlimited, i.e., the partners are equally liable for the default of one partner. Therefore, the loss suffered by one partner may affect the other partners as well. One sample clause can be— The profit and loss of the Partnership Firm shall be equally divided among all the Partners and transferred to Partner’s current account.”

6.      SHARE OF PROFIT

One sample clause can be— “Name of the party share in profits (i)………….. (ii)…………..”

7.      SALARIES AND WITHDRAWALS

The salaries of the partners are only paid to working partners. One sample clause can be— “The Firm shall open a Current account in the name of ……………. Firm at ………. bank and that account shall be operated by partners jointly. Whereas, each partner shall, from time to time, withdraw and credit balance in their income account.”

8.      MANAGEMENT DUTIES

One sample clause can be— “The First partner in the partnership firm shall be Managing Partner and he shall manage all the day to day business function of the firm along with the legal activities. The remaining partners shall also devote their entire time to the conduct of the partnership business”.

9.      RETIREMENT

One sample clause can be— “Any partner willing to retire from the Partnership Firm during its subsistence, he/she shall be competent in his/her capacity do so, provided he/she shall give at least ……………….. months’ notice in writing to the others; but none shall leave the firm until and unless all the pending commitments are carried out, liabilities paid off, assets realized and accounts are rendered fully and settled finally to the entire satisfaction of each of the partners. The remaining partners shall compensate the retiring partner, the purchase the money of his/her share in the assets of the firm.”

10.  DEATH OF PARTNER

This clause shall be included in the event of any unforeseen situation arises that may harm the business of the partnership directly. One sample clause can be— “In the event of the death of any partners, hereto the partnership firm hereby formed shall not dissolve, but shall continue. The legal heir or the representative of the deceased shall become the partner of the firm”.

11.  ARBITRATION

One of the major disadvantages of Partnerships is often disagreements between the partners and such disagreements may lead to a dispute between the partners. Therefore, the inclusion of these clauses can resolute the dispute between the parties without major prejudice to the parties or without affecting the business severely. One sample clause can be— “Whenever there by any difference of opinion or any dispute arises, or the breach thereof, shall be referred by arbitration under the rules. The decision of the arbitration shall be final and binding on all partners, and the Indian Arbitration Act shall govern all the arbitration

proceedings.”

12. 

Do you want to get our quality service for your business?