Partnership is considered to be the second most common method opted by entrepreneurs or business owners to do business in any country. To start any business as partners, entrepreneurs can opt for a written document, known as Partnership Deep to run and operate their businesses. Partnership deed is an economical, simple, and convenient way of starting a business together. So let’s understand important details regarding Partnership Deed and related aspects of doing business as a partnership firm.
Table of Contents :
Partnership Deed is a written legal document that consists of an agreement between two individuals who want to do business together and share profit and losses. Partnership Deed is also termed a Partnership Agreement wherein a business gets registered as Partnership Firm. To start a new business, two individuals gather a mutual understanding of sharing profits and losses together in a defined manner (unlike a sole proprietorship).
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Components of Partnership Deed Format
Partnership Agreement Template consists of the below-mentioned components that are required to be duly filled by the members in order to register their firm as a partnership.
- Name and addresses of all partners
- Date of establishment of partnership firm
- Capital contribution by each partner
- Guidelines for the operations of bank accounts
- Profit and loss sharing ratio of each partner
- Interest rate on borrowed capital or loan
- Rights and duties of each partner
- Rules for settlement of disputes among partners
- Rules in case of admission, retirement, or death of a partner
- Any other aspect regarding the code of conduct of business
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Features of Partnership Business
- Partnership business should consist of at least 2 members
- Banking business partnership – Member limit is equal to or less than 10
- Non-banking business partnership – Member limit is equal to or less than 20
- Partnerships do not require any minimum capital requirement to start, as they can be started with as much capital members want
- Partners should have a mutual understanding before starting a business
- The ratio of profit and loss should be decided before the signing of the partnership deed
- Every active member or partner is responsible for the action of other partners or members
- An auditor is not required while registering as a partnership firm
Also Read: Partnership Firm Registration: Process, Fees, Documents, Agreement
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Documents Required
- Form No. 1 (For registration under Partnership Act)
- Signed Original copy of Partnership Deed by every partner
- Affidavit that declares the interest of an individual of becoming a partner
- Property’s rental or lease agreement
All the existing partnership firms are registered under the law governing partnerships in India that comes under the Indian Partnership Act, 1932. After registering as a partnership firm, all the partners are required to sign and date the partnership deed. This signed document needs to be witnessed by an individual above 18 years of age who shall not be among the partners or members (excluding spouses or family members of any partner). A copy of the partnership deed should be kept with each and every partner of the firm. This deed ensures the defined roles and responsibilities of each partner. It supports in evading unrequired misunderstanding, harassment, or conflict between the partners.
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FAQs
Q. What is the minimum age of becoming a partner in a partnership firm?
Ans. The minimum age to become a partner is 18 years at the time of registration.
Q. Is it necessary to form a partnership firm?
Ans. No, it is not necessary but its formation helps is several ways like in understanding roles, investment, profit & loss ratio, as it is legal and documented. Further, shall also help in case of any suit of court or legal formalities.
Q. How many partners together can form a partnership?
Ans. A minimum of 2 and a maximum of 10 partners can form a partnership if a firm is in the banking business. However, in the case of non-banking businesses, the partners can exceed up to 20 partners.
Q. Is there any time period for registering a partnership firm?
Ans. There is no time allotted for the registration of a partnership firm. It can be registered anytime, as per the partner’s choice that is before the start of business or even after its commencement.
Q. Is there an option of changing or modifying the partnership deed?
Ans. Yes, you can change or modify the partnership deed by filling up a form and submitting it to the respective registrar or authority.
Q. How are profit and loss divided among the partners?
Ans. Generally, the profit and loss are divided equally but it also depends on the partner’s interest, as per his/her investment. The profit and loss sharing ratio that is defined before the registration signifies the exact division of profit and loss percentage.
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