What is Partnership Deed?
The Partnership Deed is the pivotal legal document of a partnership firm, which contains all matters related with the formation, efficient functioning and management, and peaceful resolution of probable disputes among the partners, of the partnership firm. The partnership deed acquires full legal potency when registered properly with the concerned legal authorities.
Here, pertinent is to mention that, a partnership is the arrangement in which two or more partners share the ownership over a business/profession/service firm, bear all liabilities of the firm, and distribute the profits and losses in the agreed proportions. In India, the partnership firms are registered under the Indian Partnerships Act of 1932. Readers here must note that, these partnership firms are different from the limited liability partnership (LLP) firms, which are registered under the LLP Act of 2008. The main elements and clauses of a partnership deed, the great importance of this written document, and the procedure for registering this, are described briefly in the lower sections of this webpage, to help Indian and foreign people and entrepreneurs interested in establishing partnership firms in India.
Importance of Partnership Deed
The following vital points contained by it elucidate the great importance of partnership deed to the partners and also to all other people or entities making dealings with the related partnership firm:
- The basis of formation and the ultimate aims of the partnership firm.
- Information related with the activities and location of the firm, and personal details of each partner.
- Information about capital contributions and sharing of profits.
- The rights, duties, and responsibilities of each partner.
- Guidelines to maintain the desired smooth functioning and ever-progressive performance of the firm.
- Measures or provisions to be followed in cases of any disputes among its partners for peaceful and equitable settlement.
- And, retirement/termination clauses.
Here, it may also be noted that a partnership deed may contain all issues/matters associated with management, regulation, growth, and winding up of the firm, but all such provisions must fall within the limits given in the Indian Partnerships Act, 1932.
How to Register Partnership Deed?
Registration of a partnership agreement or deed is not compulsory, however, its registration is immensely securing and beneficial. The procedure for registering a partnership deed covers the following broad processes or steps:
- Drafting the Deed --- Prudent, impeccable, and scrupulous drafting of the deed is done first, covering all material matters including the elements mentioned above.
- Purchasing of Non-Judicial Stamp Paper or e-Stamp Paper --- The value of this depends on the prescription in the concerned jurisdiction. In general, the deed is to be printed on a non-judicial stamp paper with a value of at least INR 100/-.
- Signing the Agreement --- The third step is the signing of the agreement by all partners, and each partner is required to keep a duly signed original copy of the agreement for his/her records, after the deed is made legalized by either of the processes mentioned below.
- Legalization of the Deed --- The duly signed deed may be made attested from the Notary Public or properly registered with the relevant legal authority. Registration of the deed may be performed under the Indian Registration Act of 1908 or the Indian Movable Property Act.