Partnership Deed

A Partnership Deed (PDR) is a written legal document containing an agreement between the partners of a firm which summarises the terms and conditions of their partnership under the “Indian Partnership Act 1932”. Get help from the experts of Legal356 for making PDR

A Partnership Deed is a written legal document that outlines the rights and responsibilities of all partners of a business or firm. Contact us to get your Partnership drafted in the best way by the best legal team!
While partnering up with others for a business/establishment, one must prepare their Partnership Deed, an agreement that explains all terms & conditions about/for all respective partners to avoid any future/legal disputes. It is used to guide all the parties in business conduct and deter unwarranted misunderstanding, unpleasantness, and harassment among the partners at the time of the dispute.
The Partnership Deed is made under the "Indian Partnership Act 1932" to deter uncertainty of the Partnership Deed. Nevertheless, one can create a partnership firm without registration. But, you must register your partnership firm under the Indian Registration Act for security from future uncertainties. One must take professional legal advice/help for drafting their Partnership Deed. You are at the right place if you are looking to start a partnership business because we have the best legal team who will help you with all the necessities needed for a Partnership Deed.

Registration Process

Overview

A Partnership Firm refers to an entity formed by two or more people who mutually agree to divide profits / loss in a predetermined ratio. In India, the primary law governing partnership registration is the Indian Partnership Registration Act of 1932.The partnership deed is a legal document used to establish the Partnership Firm Registration.

According to law, a partnership is an agreement between individuals who have consented to divide profits earned from the business operation performed within the partnership firm. A partnership firm can have a maximum of 50 members.It is crucial to note that members of a Hindu Undivided Family or a Burmese Buddhist member cannot be part of a partnership firm.Read more about Partnership Firm Rule and Regulation at The Partnership Act, 1932

Highlights

# CONCEPT

Partnership firm is a business form in which 2 or more individuals can join hands to do business.

# EASY FORMATION

Partnership firm can be easily & quickly registered in comparison to other form of business.

# LOW COST REGISTRATION

As comparison to other business form, cost of registering partnership firm is very low.

# TAX BENEFIT

More Tax Saving as compare to sole proprietor business form.

# SHARING OF RISK

Individuals having same business goal can form and share risk & rewards.

# COMPLIANCES & DISCLOSURE

Least compliance & disclosure required as compare to other business form.

Characteristics of Partnership Firm

# Number of Partners: For partnership formation, you need at least two members and the maximum number that can join is 50.

# Voluntary Registration: It is not mandatory to get Partnership Firm Registration. However, you must get it to be able to avail the additional benefits that it offers.

# Contractual partner: Every partner is bound by a contractual obligation outlined in the original partnership deed registration format, which governs various aspects of the relationship. The deed requires each partner to sign it, thereby creating a binding agreement between all parties involved.

# Competency of the Partners: Minors can not become partners for partnership formation. Every partner should be competent adults.

# Profit and Loss Sharing: The partners must divide the profits or losses according to the percentages defined as in partnership deed.

# Unlimited Liability: Every partner in a partnership firm is jointly and severally liable for any losses incurred by the firm.

# Interest Transfer: A partner can not transfer his or her interest without getting the approval of all the other partners in partnership registration.

# Principal-agent relationship: The partnership involves a principal-agent relationship between the firm and its partners. As an agent, each partner is expected to act in the best interest of the company. Additionally, any partner may represent the other partners, or the entire partnership can act jointly to conduct business. Relevance of Partnership Firm Registration Partnership Firm Registration provides unique rights and advantages over unregistered partnership firms. By registering your partnership firm, you can file a lawsuit against any partner or the partnership itself to enforce your contractual rights. However, if your partnership is unregistered, you cannot file a lawsuit to enforce your rights against your fellow partners. Additionally, a registered partnership can file a lawsuit against any third party to enforce its contractual rights, but an unregistered partnership cannot do so. Furthermore, a registered partnership can use set-off or other legal actions to enforce its contractual rights, while an unregistered partnership cannot use setoff in any legal action brought against it. Types of Partnership Firm In India

# GENERAL PARTNERSHIP:

his is the most common type of partnership firm registration in India. In a general partnership, all partners share equal rights and responsibilities. Each partner contributes to the business's capital, shares the profits and losses, and has the right to take part in the management of the firm. The liability of each partner is unlimited, which means they are personally liable for the debts and obligations of the firm.

# LIMITED PARTNERSHIP:

In a limited partnership, there are two types of partners - general partners and limited partners. General partners have unlimited liability, and limited partners have limited liability. Limited partners are not involved in the day-to-day management of the firm and are only liable for the amount of capital they have invested in the business.

# PARTNERSHIP AT WILL:

A partnership at will is formed without a specific time limit. The partners can dissolve the firm at any time by mutual agreement. In this type of partnership, partners can join or leave the firm without affecting its continuity.

# LIMITED LIABILITY PARTNERSHIP (LLP):

A Limited Liability Partnership (LLP) is a type of partnership in which the liability of each partner is limited to their contribution to the business. LLPs are governed by the Limited Liability Partnership Act, 2008. LLPs have a separate legal identity from their partners, and their liabilities are limited to the assets of the firm. It is different from Partnership Firm Registration and you can know more about it at: LLP Registration.

How to Register a Partnership Firm? - Procedure The complete process takes about 7 working days, including the approval of the DIN, company name, and company incorporation. However, creating a company is now a quick process, which allows all paperwork to be loaded into a single online platform. Our experts will help you through every step of the online company registration process.

• Step 1

  CHOOSE A NAME FOR YOUR PARTNERSHIP FIRM

  u can choose any name for your partnership firm, as long as it follows the rules set by the Registrar of Firms.

  Ensure that the name you choose is unique and not already taken by another firm. Also, avoid using any names related to the government or any other prohibited names.

• Step 2

  DECIDE PARTNER PROFIT SHARING RATIO, FIRM ADDRESS, AND OTHER TERMS OF PARTNERS

  Partners have to decide their profit and loss sharing ratio, address of firm from where business shall be operating, investment, duties and responsibilities of each partner, terms of entering new partner or exiting old partner and other relevant terms which mutually agreed upon among all partners.

• 3

  Step 3

  DRAFT PARTNERSHIP DEED AS PER THE PARTNERSHIP ACT 1932

  You need to hire a professional expert to draft a partnership deed as per the provision of the Partnership Act, 1932. A Professional will assist you in buying appropriate value of stamp paper, deed printing, obtain signature of all partners in deed, do attestation work and apply for partnership firm registration.

• 4

  Step 4

  YOU SHOULD SUBMIT AN APPLICATION TO REGISTER YOUR PARTNERSHIP FIRM

  To register your partnership firm, you need to submit an application form along with the required fees to the Registrar of Firms in the state where your firm is located. The partnership registration application must be signed and verified by all partners or their representatives.

• 5

  Step 5

  OBTAIN YOUR REGISTRATION CERTIFICATE

  Once the Registrar of Firms approves your registration application and supporting documents, your firm will be registered in the Register of Firms, and you will be given a Registration Certificate. The Register of Firms maintains the latest information of all registered firms, which can be accessed by anyone for a fee.

Documents Required for Partnership Firm Registration

#1. Photo, Aadhar & PAN of all Partners

#2. Address of Proposed Firm

#3. Form No. 1 (Application for registration under the Partnership Act).

#4. Original copy of Partnership Deed, signed by all partners.

#5. Affidavit declaring the intention to become a partner.

Types of Partners

# ACTIVE PARTNER:

An active partner is someone who has joined a partnership firm through mutual consent and actively participates in managing the business. This partner represents the other partners for all actions taken during the regular business life cycle of the company. When an active partner retires, they must publicly notify the public to release themselves from responsibility for any actions taken by the other partners after their retirement.

# DORMANT PARTNER:

A dormant partner in partnership firm registration is a legal partner who is not actively involved in managing the business. These partners are liable to third parties and share in the partnership firm's profits and losses. They are not required to make their decision to leave the partnership firm public.

# PRINCIPAL PARTNER:

A principal partner is a notional partner who engages in a business without holding any actual equity in the business. This partner is not qualified to share in the company's earnings, has no ownership stake in the business, and is not involved in its management. However, this partner is liable to other businesses for all of the firm's operations.

# PROFIT-SHARE PARTNER:

A profit-share partner in partnership firm registration is entitled to a share of the profits but is not liable for them. Third parties can only hold such a partner responsible for the actions of the firm.

# SUB-PARTNER:

A sub-partner is a partner in a partnership deed registration who agrees to divide the company's profits with a third party. Sub-partners have no rights against the company and are not liable for any obligations of the company.

# PROSPECTIVE PARTNER:

A prospective partner is someone who has been accepted as a partner into an established business with the consent of all existing partners. Such a partner is not responsible for any conduct that occurred before becoming a partner in the company.

# PREVIOUS PARTNER:

A departing partner is a partner who leaves a partnership while the other partners are still in charge of the business. Such a partner is accountable to third parties for all firm acts until they give formal notice of retirement.

# PARTNER BY HOLDING OUT (SECTION 28):

Partner by holding out, also known as partnership by estoppel, is when an individual holds themselves as a partner or permits another person to do so. When an individual represents themselves as a partner in an online registration of a partnership firm in India, they are liable to any individual who has trusted this representation and provided credit to the organization.