Partnership Deed

A partnership deed is like a rulebook, that forms the building block of a partnership firm. Think of running a business without any set of rules, or a roadmap— no clear picture of sharing of responsibilities, profit, or opinions. Chaotic right? Now, a partnership deed comes in as 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 rights, duties, obligations, and responsibilities in relation to all the partners. It provides guidance to ensure that the actions are smooth and minimizes disputes among the partners. The partnership deed is drafted at the time of forming the partnership and can be registered under the Indian Partnership Act, of 1932. Drafting the deed is mostly done with the help of a professional advisor to make sure everything is under the law. The partnership agreement is very important in the case of entrepreneurship, where registering with the government will help in securing all the partners. 

What are the types of Partnership Deeds? 

There are different types of partnerships according 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 vote of all partners. 

• Limited Partnership Deed

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

How to Draft a Partnership Deed? 

Drafting the partnership deed is a crucial step 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 to 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

What are the Partnership Deed Contents?

It is necessary to check the legal contents of the partnership agreement that is to be registered and has proper documents. 

Below are the key contents of the partnership deed: 

1. Name and addresses of partners
2. Nature of business 
3. Date of commencement
4. Capital contribution
5. Profit and loss sharing ratio
6. Roles and responsibilities of partners
7. Interest in capital and drawings 
8. Remuneration to partners 
9. Admission to new partners 
10. Retirement or death of a partner 
11. Dissolution of the partnership 
12. Dispute resolution 
13. Bank account operation 
14. Audit and accounts 
15. Indemnity clause restriction on partners 
16. Duration of partnership 

 

Frequently Asked Questions (FAQs)

 Is registering a partnership deed mandatory?

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. 

Can a partnership deed be amended?

 Yes, a partnership deed can be amended with the mutual agreement of the partners.

What happens if a partnership deed is not in place?

Without a partnership deed, the agreement will be overlooked by the government of India, which may bring ambiguity among the partners. 

What will be the duration of a partnership deed?

The agreement can be made for a fixed term and then amended with a mutual decision.