To start any business as partners, entrepreneurs can opt for a written document, known as Partnership Deed to run and operate their businesses.
A partnership deed is an economical, simple, and convenient way of starting a business together. So let’s understand important details for creating a Partnership Deed online.
Partnership firms in India are governed and regulated by the Indian Partnership Act, 1932. Partners are the individuals that join together to form a partnership firm. A contract between the partners establishes the partnership firm.
What is a Partnership Deed?
A partnership deed is a partnership agreement between the partners of the firm which outlines the terms and conditions of the partnership between the partners.
A partnership firm’s smooth and successful operation necessitates a clear knowledge among its members of the numerous policies that govern their partnership. This is what the partnership deed is for. It clarifies terminology such as profit/loss sharing, salary, interest on capital, draws, new partner admission, and so on for the benefit of the partners.
The purpose of a partnership deed is to provide a clear understanding of the roles of each partner, which ensures the smooth running of the operations of the firm.
It specifies the various terms such as profit/loss sharing, salary, interest on capital, drawings, admission of a new partner, etc. in order to bring clarity to the partners.
How to create a partnership deed online?
You are already at the right platform to create your partnership deed online. You just need to follow some easy steps to create a partnership deed.
- Click the generate now button
- Answer few simple questions
- Preview the partnership deed created by our system.
- Download your partnership deed
- Submit the file to the Registrar of Firms of the State in which the firm is situated.
What are the documents required for registering a partnership deed?
If you also want to register your partnership deed, then follow these steps:
- Form No. 1 (For registration under Partnership Act)
- Signed Original copy of Partnership Deed by every partner
- Affidavit that declares the interest of an individual of becoming a partner
- Property’s rental or lease agreement
- After registering as a partnership firm, all the partners are required to sign and specify the date of signature in the partnership deed.
- This signed document needs to be witnessed by an individual above 18 years of age who shall not be among the partners or members (excluding spouses or family members of any partner).
- A copy of the partnership deed should be kept with each and every partner of the firm.
What will be there in the partnership deed?
Partnership deeds can be oral or written; however, an oral agreement is of no use when the firm has to deal with tax.
A few essential characteristics of a partnership deed are:
- The name of the firm.
- Name and addresses of the partners.
- Nature of the business.
- The term or duration of the partnership.
- The amount of capital to be contributed by each partner.
- The drawings that can be made by each partner.
- The interest to be allowed on capital and charged on drawings.
- Rights of partners.
- Duties of partners.
- Remuneration to partners.
- The method used for calculating goodwill.
- Profit and loss sharing ratio
What are the contents/ guidelines of the partnership deed?
Partnership Agreement Template consists of the below-mentioned components that are required to be duly filled by the members in order to register their firm as a partnership.
- Name & addresses of all partners
- Date of establishment of the partnership firm
- Capital contribution by every partner
- Guidelines for the operations of firm’s bank accounts
- Profit and loss sharing ratio of each partner
- Interest rate on borrowed capital or loan
- Duties & rights of each partner
- Rules for settlement of disputes among partners
- Rules in case of admission, retirement or death of partner
- Any other aspect regarding the code of conduct of business
These clauses are suggested to be added in a Partnership Deed. You can remove or add any other clauses at your convenience.
What is the importance of a partnership deed?
A few important advantages of a well-drafted deed are listed:
- It controls and monitors the rights, responsibilities and liabilities of all the partners
- Avoids dispute between the partners.
- Avoids confusion on profit and loss distribution ratio among the partners.
- Individual partner’s responsibilities are mentioned clearly.
- Partnership deed also defines a remuneration or salary of the partners and working partners. However, interest is paid to each partner who has invested capital in the business.
|Read Importance of partnership deed to know more!|
What is the minimum age of becoming a partner in a partnership firm?
The minimum age to become a partner is 18 years at the time of registration.
Is it necessary to form a partnership deed?
The Partnership Act,1932 provides that if the partners want, they may register the firm with the Registrar of Firms of the state in which the firm’s main office is situated.
How many partners together can form a partnership?
A minimum of 2 and a maximum of 10 partners can form a partnership if a firm is in the banking business. However, in the case of non-banking business, the partners can exceed up to 20 partners.