A Partnership Deed is a crucial legal document that formalizes the agreement between two or more individuals or entities entering into a partnership. It serves as a comprehensive guide to the operational, financial, and managerial aspects of the partnership, ensuring clarity and mutual understanding among the partners. By outlining the rights, responsibilities, and obligations of each partner, the deed helps to prevent disputes and provides a structured approach to running the business.
Key Elements of a Partnership Deed:
Parties Involved: The deed starts by identifying the partners, including their full names, addresses, and business roles. This section establishes the legal identity of each partner and their commitment to the partnership.
Business Details: It specifies the nature of the business, including its objectives, activities, and operational scope. This section defines what the partnership will be engaged in, whether it's manufacturing, trading, services, or another field.
Capital Contributions: The deed outlines the initial capital contributions of each partner, specifying the amount of money, assets, or resources each partner is investing into the business. This section is critical for defining ownership percentages and financial responsibilities.
Profit and Loss Sharing: It details how profits and losses will be distributed among the partners. This could be based on the proportion of their capital contributions, agreed ratios, or other methods. Clear profit-sharing arrangements help to manage expectations and financial planning.
Management and Decision-Making: The deed describes the management structure and decision-making processes within the partnership. It may specify the roles and responsibilities of each partner, including who will handle day-to-day operations, financial management, and strategic planning.
Bank Accounts and Financial Arrangements: The document may outline how the partnership’s bank accounts will be managed, including who has authority to operate them. It also details how financial records will be maintained and audited.
Admission and Withdrawal of Partners: Procedures for admitting new partners or handling the exit of existing ones are included. This section ensures that changes in the partnership do not disrupt business operations and are managed according to predefined terms.
Dispute Resolution: The deed often contains provisions for resolving disputes among partners, including mediation or arbitration methods. This helps in managing conflicts effectively without resorting to legal battles.
Dissolution: It specifies the terms and conditions under which the partnership can be dissolved. This includes the process for liquidating assets, settling liabilities, and distributing the remaining assets among the partners.
Legal and Compliance Issues: The deed must comply with local laws and regulations governing partnerships. This section ensures that the partnership operates within the legal framework and adheres to regulatory requirements.
In essence, a Partnership Deed is a foundational document that helps partners establish a clear and mutually agreed-upon framework for their business relationship. It minimizes potential conflicts by documenting agreements and expectations in writing, thus providing a legal basis for resolving disputes and managing the partnership’s affairs effectively. Drafting a well-considered Partnership Deed is essential for the successful operation and longevity of any partnership.
( On stamp paper of Value which may vary as per state to state )
DEED OF PARTNERSHIP
THIS DEED of Partnership is made at.................... on this .................... day of ............... by and between:
Shri ............................... aged about .............. years, son of Shri .................................. resident of (Hereinafter to be called the First Party);
Shri ............................... aged about ............... years, son of Shri .................................. resident of (Hereinafter to be called the Second Party);
Shri ............................. aged about ................ years, son of Shri .................................. resident of (Hereinafter to be called the Third Party);
Shri .......................... aged about ................. years, son of Shri .................................. resident of (Hereinafter to be called the Fourth Party);
WHEREAS the parties to this deed have been carrying on the business of ....................................... under the name and style of M/s. ......................... with its principal place of business at ............. on the terms and conditions incorporated in the Partnership Deed executed on .........................................
AND FURTHER WHEREAS the parties to this deed have been carrying on the above said business in partnership on the terms and conditions orally and mutually agreed amongst themselves as stated in partnership dated _________ between ;
AND NOW WHEREAS the parties to this deed desire that the terms and conditions on which they have been carrying on the above said business in partnership since ...................... and propose to continue in future be reduced to writing to avoid future difficulties or misunderstanding.
NOW, THEREFORE THIS DEED WITNESSETH as under, incorporating the aforesaid amendment/ alteration in the terms and conditions of the partnership:
1. That the partnership business has been and shall continue to be carried on under the name and style of M/s. ....................................
2. That the partnership business has been and shall continue to be that of ................ with its principal place of business at .............. The parties by mutual consent may carry on business at such other place or places, in such other name or names and of such other nature or natures, as they may deem fit and proper from time to time.
3. That the amount lying to the credit of the partners as on _________ shall be deemed as their capital investment. Further capital, loans or deposits looking to the needs/requirements of the partnership firm shall be arranged, invested or contributed by the partners.
4. That interest at the rate of 12% per annum or as may be prescribed under section 40(b)(iv) of the Income-tax Act, 1961 or any other applicable provisions as may be in force in the income-tax assessment of the partnership firm for the relevant accounting period or at a lower rate as may be agreed to by and between the parties from time to time shall be paid to the partners or credited to the partners on the amount standing to the credit of the account of the partners.
Such interest shall be considered as an expenditure of the firm and shall be debited to the Profit & Loss Account of the firm before arriving at the divisible profit or loss. The interest to persons other than partners shall be paid or credited to their accounts at the rate or rates as may be agreed to by and between the partners and such persons from time to time.
5. That Shri ................................ Shri ..................... and Shri ............................ the parties of the ....................... parts have agreed to keep themselves actively engaged in conducting the affairs of the business of the partnership firm. The said partners shall be working partners. It is hereby agreed to that in consideration of the said parties keeping themselves actively engaged in the business of the partnership firm and working as working partners, shall be entitled to remuneration.
The remuneration payable to the said working partners shall be computed in the manner laid down or deduction under section 40(b)(v), read with Explanation 3 of the Income-tax Act, 1961 or any other applicable provision as may be in force in the income-tax assessment of the partnership firm for the relevant accounting year. Such amount of remuneration shall be distributed between the said working partners in the following proportion:
A. Shri ................................ ....... per cent of such amount
B. Shri ................................ ....... per cent of such amount
C. Shri ................................ ....... per cent of such amount
D. Shri ................................ ....... per cent of such amount
The partners shall be entitled to increase or reduce the above remuneration and may agree to pay remuneration to other working partner or partners as the case may be. The partners may also agree to revise the mode of calculating the above said remuneration as may be agreed to by and between the partners from time to time.
6. That the parties hereto shall be true and faithful to each other and shall not do or cause to be done anything which may be detrimental to the interest of the firm.
7. That the parties shall keep or cause to be kept proper books of account and documents and shall make entries therein of all receipts, payments and other matters as is usually done and entered in the books of account kept by persons engaged in business similar to that of the firm. Each partner shall have a right to have access to and to inspect and take copy of the same.
8. That the partnership has been and shall be a partnership at will.
9. That the net profit of the partnership firm after deduction of all expenses including rent, salaries, other establishment expenses, interest and remuneration payable to the partners in accordance with this deed of partnership or any supplementary deed as may be executed by the partners from time, to time, shall be divided and distributed amongst the partners in the following proportion:
Sr. No. Name of Party Share in profits
1.
2.
3.
4.
The losses, if any, including loss of capital suffered in any year shall also be apportioned in the above said proportion.
10. That the bank account or accounts have been and shall be maintained in the name of the firm and shall be operated singly or jointly by the partners.
11. That the books of account shall be closed on 31st day of March each year. The net profit or loss after deducting all expenses, interest, remuneration, outgoings shall be divided between the parties in proportion to the sharing ratio referred to hereinabove.
12. That notwithstanding anything contained in the Indian Partnership Act it is hereby mutually agreed to by and between the parties that in case of death of any one or more partners, the firm shall not be dissolved but shall continue to be carried on by and between the surviving partners and legal heirs and/or representatives of the deceased partner, as a continuing concern, on the same terms and conditions as incorporated in this Deed or on such terms and conditions as may be agreed to by and between them from time to time. It is hereby further clarified that it shall be deemed as change in constitution and not succession.
13. That with respect to any matter connected with the affairs of the firm, which is not specifically provided for herein, the partners may make such agreements therefor and may set in such manner with regard thereto as may be agreed upon by and between themselves.
14. That if the partners deem proper and in their interest, they may admit any other person or persons as partners on the terms and conditions as may be mutually agreed amongst themselves.
15. That the partners to this deed are partners in their individual capacity/representing HUF styled as M/s. ..................................... The parties do not represent any other person.
16. All bonds, bills, notes, bills of exchange, hundies or promissory notes or other securities given on behalf of the partnership (except cheques) shall be signed, endorsed, accepted or executed jointly by all the partners and any bond, bill, note, bill of exchange, etc. to which any partner may be a party contrary to this provision shall be deemed to have been on the personal account of such partner and he shall pay and discharge the same out of his own moneys and indemnify other partners and the firm against payment thereof and against all actions, proceedings, costs, charges, expenses, claims and demands in respect thereof.
17. That the parties of ...................... part are not working partners but are only financing, dormant and sleeping partners. The parties of ....................... part need not be in charge of, responsible to the firm for the conduct of the business of the firm and need not take interest in day-to-day working and business of the partnership firm.
That the parties of the ............................ part shall not be liable to any criminal action for the business or working of the partnership firm or for the acts of the other partners or its employees or its representatives for and on behalf of or on account of the partnership firm or for the purposes of the partnership firm. The said partners shall not be liable for any liability, civil or criminal, against the partnership firm or other partners.
That the said partners shall not become and shall not be liable for any criminal action for any default or offence committed by other partners or employees or authorised representatives of the firm under the Income-tax Act, Customs Act, Foreign Exchange Regulation Act, Sales tax Laws or other Central or State Acts, laws, Rules or Regulations.
18. That the partners shall be entitled to modify the above terms relating to remuneration, interest, etc. payable to partners by executing a supplementary deed and such deed when executed shall have effect unless otherwise provided from the first day of accounting period in which such supplementary deed is executed and the same shall form part of this deed of partnership.
19. That all disputes and questions in ...................... connection with the partnership or this deed arising between the partners or between any one of them or their legal representatives and whether during or after the partnership, shall be referred to the arbitrator in accordance with the provisions of the Arbitration and Conciliation Act, 1996 then in force.
IN WITNESS WHEREOF the parties to this deed have set their hands on the day and year first above written and in the presence of:
First Party Second Party
Third Party Fourth Party
WITNESSES;
1.
2.
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