Today at myonlineca we are discussing about Partnership Deed and Deed Format. A partnership deed is a written legal document that provides a framework in details of the rights and responsibilities of all partners to a business operation. It is a legal document that is designed to guide the partners in the conduct of the business. It is helpful in preventing conflicts and disagreements over the decision and steps taken in the business and the benefits. Partnership Deed helps in avoiding unnecessary misunderstanding, harassment, conflict, and unpleasantness among the partners in the event of any dispute. The deed also provides for the remedial action that will help in resolving any dispute that may arise.
The registration of Deed of Partnership is made under the Indian Registration Act, 1908, However, a partnership firm can also be created without registration under the Indian Registration Act.But It is always advisable to create a clear partnership deed before commencement of business .Also, Registration of a Partnership Deed will enable the partnership firms to obtain PAN, apply for bank loans and other funds, opening a current account in Partnership Firm name, obtain GST registration or get any other Business related license and permit.
Format For Executing A Partnership Deed
The partnership agreement should be printed on a Non-Judicial Stamp Paper with a value of Rs.100/- or more based on the financial worth of properties held in the partnership firm. The partnership agreement is witnessed and signed in the presence of all the partners and when the document is signed by the Partners, the signed duplicate copy of the partnership deed is held by each of the Partners.
Things to be Included In The Partnership
A partnership agreement should include the following information:
- Name of the Partnership, Term of the partnership. A partnership can be perpetual or for a specific term length.
- What activities is the partnership engaging in?
- What products or services will be sold?
- How will new products or services be added?
Types of partners in a partnership.
- Contributions of each partner in cash, deferred contributions, property, and service.
Admitting new partners, and what is the required new partner contribution.
What happens if a partner fails to make an initial contribution?
Additional future contributions.
- When will additional contributions be accepted?
- How will future contributions affect the partner’s share?
- How profits and losses are distributed among the partners?
- When may partners take a draw from their partnership share?
- How are profits and losses allocated to partners, for the purpose of partner percentages?
- Management powers and duties,
- Financial matters and Power to authorize expenses.
- Meetings, Maintenance of records, Partner time off, including leaves of absence, vacations, sick leaves.
- Will partners be allowed to take part in any other business activity apart from the partnership Business undertaking?
- conflict of interest policy.
- Ownership of business assets.
- Sale or transfer of a partner’s interest
- Non-competition clause. Non-disclosure clause, Non-solicitation clause.
- Expulsion of a partner from the partnership, Amending partnership agreement, how and when, Adherence to state law.
In the above list we have listed Clauses that are to be included in the partnership agreement, you need to list all the clauses in the Partnership Agreement, It is understandable that you might forget to include some clauses in the Partnership agreement, But Keep these 5 clauses that I am listing in mind all the time when you form a Partnership Agreement for your Partnership Firm.
Here are five clauses every partnership agreement should include:
- Capital contributions – Your partnership agreement should clearly state what contributions such as Cash, property, securities, assets, and even certain skills each partner will make towards the partnership Firm and the percentage of ownership interest that they will take away.
- Duties and powers given to the partners- This includes clearly defining each partner level of authority and power, decision-making power that will be given to the partners, Important management duties that will carry out by the partners and Any other Business responsibilities that need to be done by partners.
- Sharing and assignment of profits and losses- The Partnership agreement should point out whether partners will be able withdrawal from his or her allocated profits each year or whether the partners can take their entire assigned profits or how partners will deal with the situation of loss.
- Acceptance of liabilities- If there is any shortfall of finance and Assets in the partnership then the Partner is personally responsible for all debts and obligations of the partnership. Partners should have a clear understanding of liabilities and must have full acceptance of it.
- Dispute resolution- Disputes can occur in any Business undertaking, so The partnership Deed should clearly state how and in what manner the disputes that occur in Partnership will be resolved.