What is a Partnership Deed?
A partnership deed between two partners is a written agreement of sharing profit and loss of a firm between two or more partners. It includes all the terms and conditions that should be fulfilled by every partner to run the business effectively. The partnership deed between two partners should be registered under the Indian Registration Act, 1908, and is also known as a partnership agreement.
A partnership deed between two partners acts as a legal document. It is of importance and can be presented in a court of law in case of any dispute in the future. The registration of the partnership firm is successfully done after the deed is registered.
What are the contents of a Partnership Deed?
The partnership deed between two partners includes every detail related to the firm that may avoid any dispute in the future. As there is no standard format for partnership deed between two partners, the contents remain more or less the same during drafting.
It can be a verbal partnership deed between two partners, but the written one has a legal value and can be used to file a suit in case of any litigations.
It includes the following content:
- Partnership purpose: The type of business commenced is stated in detail, along with the name and address of every partner.
- Business Location: a partnership deed between two partners states the location from where the business will commence and will be decided with the consent of every partner.
- The duration of partnership: will state when the firm has been established and how long it will run according to the deal period.
- Capital contributions and withdrawal: the capital contributed by every partner in goods, services, cash, and property will be mentioned in the partnership deed between the two partners. The capital withdrawal policy will be mentioned along with the interest rate to be given by every partner.
- Salary and commission of partners: the partnership deed between two partners contains details of the payable salary or commission to every partner.
- The ratio of profit/loss: States the percentage that will be shared by the partners.
- Regulation for partnership dissolution: the management of firm account transactions during dissolving will be mentioned in the partnership deed between two partners.
- Admission rules: will state the details of a partner’s entrance, exit, and retirement from the firm.
- Rules and regulations: a specific set of rules/guidelines that will be followed if a partner goes bankrupt or is unable to pay the interest. This information is stated briefly in the partnership deed between two partners.
- Audit and account details: here, the transaction account and books of the firm are elaborated and stated in detail, keeping it available for every partner to check and inspect when necessary.
- Voluntary withdrawal: the set of rules mentioned in the partnership deed between two partners for voluntary withdrawal.
- Duties and borrowings: the role and duties of every partner will be stated in the partnership deed between the two partners. Any loan taken from banks, financial institutions, or third parties for the firm’s financial requirements will incorporate only by the written consent of every partner.
- Partnership and banking funds: the bank account where funds will be kept in the firm’s name will be decided by all the partners and will be stated in the partnership deed between the two partners
- The financial year of partnership. The period of the financial year will be written in the partnership deed between the two partners.
The method of creating a Partnership Deed
- A partnership deed between two partners (or more partners) must be created on a judicial stamp paper which is procured from the state registrar’s office per the Indian Stamp Act.
- A signed copy of the partnership deed must be obtained by each partner. The registration is completed at the sub-registrar’s office, and only then a partnership deed between two partners is legally valuable or valid.
- The registration is not mandatory but is legally enforceable if the partners decide to register it. The stamp duty and nominal charges must be cleared, and an affidavit should be submitted by each partner that is written on a stamp paper mentioning the reason for entering a partnership.
- It is suggested to take online legal advice before entering into a partnership deed between two partners so that the registration can be prompt and efficient.
The registration process in brief:
- It is commenced under the Indian Partnership Act 1932
- An application with details about the firm should be submitted to the Registrar of Firms in Form A.
- A copy of an agreement that states every rule, regulation, and policy will be signed by each partner and filed with the registrar.
- Clear the stamp duty, affidavit, or any other necessary charges.
- The firm name is incorporated into the government records after the registrar approves the registration application, and partners can obtain the incorporation certificate.
The partnership deed between two partners is of legal value after registration that can be used during case filings or inspection by the tax authority.
What are the documents needed for the Registration of a Partnership Firm?
The registration of a partnership firmis not compulsory by law and will be commenced by the consent of all the partners under the Indian Partnership Act. It shall get registered during the establishment period or commencement. It has no specific duration regulations.
The documents required are:
- The original approved copy of the partnership deed.
- The identity proof of all the partners ( PAN, Aadhar card, voter id, driving license)
- Address proof of the company
- The documents for GST registration
- An attested affidavit with every detail about the firm and partners.
- Form 1 (application of registration)
A partnership deed between two partners is a legally binding agreement that clarifies rules and regulations and is followed by every partner. The role and duties are stated to avoid misunderstanding and disputes.
The partnership deed between two partners also regulates their rights in the agreement. The process can be crucial and requires knowledge about every possible circumstance, so it is beneficial for an individual to seek online legal advice as it is a vital agreement.