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11 Aug, 2023
A partnership deed is a partnership agreement between a company's/organisation’s partners that outlines the terms and conditions of the partnership between the partners. The purpose of the partnership agreement is to ensure a clear understanding of the role of each partner and the smooth running of the company's operations.
There is an outcome of agreement among the partners.
The agreement can be either in written or oral form.
Partnership law does not require the contract to be in writing. Whenever it is in writing, the document containing the terms and conditions is called a "partnership deed".
This typically includes attributes related to all characteristics that affect the connection between partners, such as transactional objectives, capital contributions of each partner, profit and loss split ratios between partners, and partner privileges and qualifications. Loan interest, capital interest, etc.
According to the Partnership Act 1932, registration of a partnership company is not mandatory. The company has no legal personality and registration does not change this fact. However, registration is the final proof of the company's existence and its legality.
Not registering a company has real legal implications for the partner and the company itself. Therefore, it is always advisable to prepare a written basic articles of incorporation and register the company in the trade register. If you don't do this, the result is:
The firm cannot file legal proceedings against any third party for any situation. For example, if the client has not paid his dues to the firm, the firm cannot sue him if it is unregistered.
An unregistered firm cannot fail a case against a partner for any reason (like mismanagement, theft etc)
A partner of an unregistered firm cannot file a suit against one of the other partners either.
According to the India Partnership Act 1932, there is no time limit as such for the registration of a firm. The firm can be registered on the date when it is incorporated or any such date after so. The requisite fees and fines must be paid. The procedure for such a registration is as follows,
Application to the Registrar of Firms in the prescribed form (Form A). Nowadays this facility is even available online. Such an application must contain certain basic details about the firm such as,
Name of the Partnership Firm
Name and address of all partners
Place of business (address of main and branch offices)
Duration of the partnership
Date of joining of partners
Date of commencement of business
The duly signed copy of the Partnership Deed (which contains all the terms and conditions) must be filled with the registrar
Deposit/pay the necessary fees and stamp duties
Once the registrar approves the application, the firm will be entered into the records. And the registrar will also issue a certificate of incorporation. This is how the process of registration will be completed and the firm will attain legal recognition.
A partnership deed can be in an oral format; however, it is crucial to have it written. The drawback with the oral one is that it has no value for tax purposes, and one cannot use it as a legal document if there's any dispute among the partners. So, it is desirable to have a written partnership deed.
It enables the business owners to file a suit in court in case of any dispute.
It helps avoid any misunderstanding or conflict among the business owners as all the terms and conditions have been decided and mentioned already in the Deed.
It clearly outlines the duties of each partner.
It provides details of the profit/loss ratio and reduces the chances of misunderstanding.
It mentions the amount invested by each partner in the business.
It also details the salary and commission paid to partners, and if any of the partners withdraw the capital, then what interest they will have to pay.
To register for a Partnership deed, the partners involved in the business need to pay the partnership deed registration fee that includes the following charges:
Partnership Deed Registration Charges: The partners must pay for the affidavit made on a non-judicial stamp paper of Rs 10 with a court fee of Rs 3.
Stamp Duty Charges: The stamp duty charges that vary across states must be paid as a part of the registration fee. In Delhi, the minimum stamp duty charge on a partnership deed is Rs 200, whereas, in Mumbai, the amount is Rs 500. The stamp duty charges differ across states, typically ranging between Rs 200 – Rs 10,000.
There's a set of documents that are required to register for a partnership deed. The documents needed to form a partnership are as follows:
PAN Card of each partner
Application form No. 1
Partnership deed copy signed by all the partners
PAN of the firm
Address proof all the partners
Address proof of the organisation
A Notarial Affidavit of acknowledgement with all the details.
Photographs of all the partners
An official authority must sign the documents that are required for the registration of the partnership deed.
Possession of a partnership certificate is not required, but it is recommended to obtain one as it helps regulate the rights, obligations, and responsibilities of each business partner. According to the Indian Partnership Act of 1932, there is no specific registration period for partnership companies. With the consent of all shareholders, the company may register at or after its establishment. The step-by-step process is as follows:
Application to the Registrar of Firms in Form A with all the vital information about the firm;
A signed copy of the agreement that specifies all the rules and policies must be filed with the registrar;
Pay the affidavit fee, stamp duty charges, and other essential charges;
After the registrar approves the registration application, the company name is added to the government records, and the partners can collect the incorporation certificate.
If you want to understand the social contract, you first need to know how the social contract is formed. When two or more people start a new business and want to share their profits and losses, they work together to form a partnership. Such a written agreement is called a "partnership certificate." Also known as a "partnership agreement." And if such a company is registered under its own name, it is called a "partnership company".