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Partnership Deed

Last Updated On -24 Feb 2025

A partnership deed is like a rulebook that forms the building block of a partnership firm. Think of running a business without rules or a roadmap—no clear picture of sharing responsibilities, profit, or opinions. Chaotic right? A partnership deed is a set of rules guiding the people involved in the business through their roles and rights.

Without a partnership deed, partnerships might be built on trust, but with it, they are built on trust and clarity.

What is a Partnership Deed?

A partnership deed is a legal document, also known as a partnership agreement, that covers all the partners' rights, duties, obligations, and responsibilities. It provides guidance to ensure smooth actions and minimizes disputes among the partners. The partnership deed is drafted when the partnership is formed and can be registered under the Indian Partnership Act of 1932. Drafting the deed is mainly done with a professional advisor's help to ensure everything is under the law. The partnership agreement is significant in the case of entrepreneurship, where registering with the government will help secure all the partners.

What are the types of Partnership Deeds?

Different types of partnerships are tailored to the needs and demands of the business.

Listed below are the partnership deed types:

Fixed partnership deed

This deed has fixed roles, responsibilities, and profit sharing and cannot be changed without mutually agreed consent.

Flexible partnership deed

In this deed, entering a new partner or the profit-sharing ratios are changed according to the votes of all partners.

Limited Partnership Deed

In this type, one or more of the partners has limited liability. Still, at least one partner has unlimited liability, which allows the partner to contribute the capital but not actively manage the business.

How to Draft a Partnership Deed?

Drafting the partnership deed is crucial in forming a partnership firm, keeping the dispute to a minimum, and ensuring clarity among all.

Here’s a step-by-step guide on how to draft a partnership deed:

Step 1: Choose a Partnership Name

Step 2: Specify the Business Details

Step 3: Include Partner Details

Step 4: Define Capital Contributions

Step 5: Profit and Loss Sharing Ratio

Step 6: Describe Roles and Responsibilities

Step 7: Include Clauses for Key Terms

Step 8: Add Additional Terms (if necessary)

Depending on the nature of the business, additional terms can be included, such as:

Restrictions on partners (non-compete clauses).
Withdrawal of funds by partners.
Bank account operations and authority.

Step 9: Prepare the Final Document

Step 10: Sign the Partnership Deed

Step 11: Register the Partnership Deed (Optional but Recommended)

Though not mandatory, registering the partnership deed with the Registrar of Firms under the Indian Partnership Act, 1932, provides legal recognition to the partnership and helps avoid future disputes.

How to Register the Partnership Deed in India?

Although it is not necessary to register the partnership deed, it is advised to do so. Registering the deed with the Registrar of Firms under the Indian Partnership Act, 1932, provides legal recognition.

Step 1: Prepare the Partnership Deed

Step 2: Notarize the Partnership Deed

Step 3: Fill out the Registration Application (Form I)

Step 4: Attach Supporting Documents

Submit the following documents along with the form:

Partnership Deed (original and a photocopy)
Proof of Address of the Firm: Rent agreement, utility bill, or ownership document of the premises
Identity and Address Proof of Partners: Aadhaar card, PAN card, passport, or voter ID
Affidavit: A declaration signed by all partners affirming that the firm is formed legally and all information provided is correct.

Step 5: Pay the Registration Fee

The fee varies from state to state, ranging between INR 200 and 2000.

Step 6: Submit the Application

Step 7: Verification by the Registrar

Step 8: Apply for a PAN Card

Step 9: Open a Bank Account