A Partnership Deed is a document that legalizes or legitimizes a Partnership Agreement. These agreements occur between two or more people and lay down rules, policies, and guidelines regarding how to run a business.
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2. What is a Partnership Deed?
A Partnership Deed is a document that
legalises or legitimizes a Partnership
Agreement. These agreements occur
between two or more people, and lays down
rules, policies, and guidelines regarding
how to run a business. Partnership firms
are a very popular type of business entity in
India, and are distinctly different from other
organisational structures like a company,
trust or Sole proprietorship.
3. What is a Partnership Firm?
When compared to other kinds of entities, setting
up a partnership requires lower administration
costs, and takes less time. However, while these
structures provide liability protection, partnership
firms do not. For instance, a partnership does not
exist as a separate legal entity away from its
partners. Therefore, if your firm encounters or
incurs a liability, the partners involved would be
held liable and responsible for it. However,
partnership firms are a convenient, effective,
cheap and effortless way to enter into business
with someone you trust. A Partnership Deed
serves as a written record of such a deal.
4. Importance Of Partnership Deed
● Describes the roles, responsibilities, and duties of the
partners
● Helps establish the ownership interest partners have in the
firm
● Defines how the profit and loss distribution will be once
operation starts
● Significantly helps the partners prepare for business
scenarios that will arise once they start operating
● Includes important rules regarding the management of the
partnership firm
● Provides guidelines regarding how to conduct the business
giving some clarity to the partners
● Serves as a founding document for the existence of the
partnership firm
● Ensures there is clear communication between the two
partners
5. What Does A Partnership Deed Cover?
1. The legal name of the firm
2. Brief description regarding the business activities and nature of engagement of
the firm
3. Legal information, such as contact details, address and name of the partners
involved
4. Description of the assets and capital distribution supplied by the partners
5. Clause regarding the ownership interest as a percent of each partner
6. Clause describing how the partners will share profits and losses incurred by
the firm
7. Clause which talks about the management responsibilities of the partners, and
how they can vote
8. Clause describing the process involved in adding or removing a partner from
the firm
9. A Dissolution clause regarding how and under what circumstance the firm can
be dissolved, and how the assets will be divided after dissolution
6. What To Do After Making a Partnership Deed?
A Deed can be either oral or written, and the latter is
more commonly used one as it provides more clarity It
must be drafted on a Non-Judicial Stamp paper worth
INR 100 or more, and its value depends on the value of
the assets owned by the partnership firm.Once the Deed
has been drawn up by a lawyer, it must be signed by all
the Partners. Also, each witness will need another
witness to sign the document. The witness can be any
adult of sound mind, and they should be someone who is
not a part of the partnership firm in any way. Therefore,
partners cannot sign the document as each other’s
witness. Also, all the partners must keep a copy of the
Deed with them. If they ever want to add, delete, or
change any clause, they may do so by amending the
Deed.
7. Why Create Partnership Deeds?
While the law does not demand that partners
create such a deed, it is quite integral to a
Partnership Firm. This is so because it helps
clear doubts, avoid confusions and
encourages clear communication between
the partners. Also, if problems do arise later
on, having a notarised deed will help provide
some much-needed legal clarity to the entire
situation. Partnership Deeds also help in
providing clarity, a deeper insight into the
working of the firm and avoids mistrust
between the partners.
8. Documents Needed
1. Valid Identity Proofs of all the
partners
2. E-stamp paper worth the
required amount
3. Registration fee applicable
4. Aadhar Cards of all the
partners
5. Two Passport-sized photos of
each partner
9. Benefits of a Partnership Deed
● Founding documents associated with a
partnership firm
● Sets up success by ensuring there is
clear communication between the
founders from the get-go
● Defines the roles and responsibilities of
everyone involved helping streamline
operations
● Helps provide contingency plans for
when things go south
● Protects the partners involved, and gives
some legal weightage to their partnership
● Outline expectations and responsibilities
to prevent fallouts later
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