One of the most common business firms in India is Partnership Firm Registration. These firms are suitable for all forms of businesses. They are easy to run and can be formed with less formalities. They are the traditional method of doing business in partnership. The most modern form of doing business in partnership is LLPs. They are the evolved version of doing business in partnership with all the advantages of the corporate entities. But here we are going to discuss traditional partnership firms which are governed by the Partnership Act of 1932. These firms can be started by a minimum of two members who are known as the partners of the partnership firm. These firms are a kind of contract between the partners and that contract is in the form of partnership deed registration. This deed is made mutually among the partners. In order to do established business partnership deed registration is suggested. In order to learn more, continue reading this blog till it ends.
What is a Partnership Firm?
When two or more persons or entities come together in order to do any kind of business through a contract which is registered as per the provisions of the Partnership Act of 1932, it is called partnership firm. These people with whose association this firm forms are known as the partners of the partnership firms. Such kinds of entities can be registered or non registered but as an expert it has been suggested to register them as evidentiary value of the registered document is more. Such firms do not have advantages like corporate bodies but they have their own benefits like easy management, quick decision making, profit sharing etc.
What do you Mean by Partnership Deed?
As mentioned above, partnership firms are formed or incorporated with the help of a contract which is known as partnership deed. Contracts are valid only if they are enforceable under the provisions of law. Similarly partnership deeds are the association of partners to do an act which is mutually agreed among all the partners. Partnership formed for any illegal purpose cannot be a valid partnership. Hence make sure that your partnership deed is legally enforceable. This can be checked by partnership deed registration.
Important Clauses of a Partnership Deed
Some of the key points which are important for the partnership deed are mentioned below in the table:
| Clause Name | Description |
| Name and Address | Clearly mention the full names and addresses of all the partners involved in the partnership |
| Business Name | If the partnership operates under a business name other than the partners’ names, specify the chosen business name |
| Nature of Business | Clearly define the nature of the business that the partnership is engaged in |
| Capital Contribution | Outline the amount of capital each partner is contributing to the partnership. This includes cash, assets, or any other form of contribution |
| Profit Loss Sharing | Indicate the ratio or percentage that each partner will get from earnings and losses. |
| Decision Making | Clearly state the decision-making process and the authority of each partner in the management of the business |
| Drawings | Define the procedure for partners to withdraw funds from the business for personal use, known as drawings |
| Interest on Capital and Drawings | If applicable, mention the rate of interest on capital and the rate charged on drawings |
| Salaries and Commissions | If partners are entitled to a salary or commission, outline the terms and conditions for such payments |
| Partnership Duration | Specify whether the partnership is for a fixed term or if it’s an ongoing arrangement until further notice |
| Admission of New Partners | Define the process and conditions under which new partners may be admitted to the partnership |
| Retirement or Registration | Outline the procedures and consequences if a partner decides to retire or resign from the partnership |
| Dispute Resolution | Detail the process for resolving disputes among partners, whether through mediation, arbitration, or any other agreed-upon method |
| Dissolution | Specify the circumstances and procedures for the dissolution of the partnership, including the distribution of assets and liabilities |
| Restriction on Partners | If there are any restrictions on partners, such as non-compete clauses, outline them clearly |
| Books of Accounts | Define the procedures for maintaining and auditing the partnership’s books of accounts |
| Force Majeure | Include clauses related to force majeure events, outlining how unexpected events like natural disasters might impact the partnership |
| Amendments | Specify the process for amending the partnership deed, if necessary, and ensure that changes are agreed upon by all partners |
Process of Partnership and Partnership Deed Registration
In order to do partnership firm or partnership deed registration follow the steps mentioned or discussed below in detail:
Drafting the Deed
Prepare the Partnership Deed outlining the terms and conditions agreed upon by all partners. Include essential details such as names, addresses, contributions, profit-sharing ratios, and other relevant clauses. Also ensure that all the partners agree on the terms and conditions mentioned under the partnership deed. It is important to have consent of all the partners in order to do partnership deed registration.
Stamp Duty Payment and Notarization
Purchase non-judicial stamp paper of the appropriate value, as per the Stamp Act of the respective state. The value of stamp paper depends on the capital contribution and the agreed terms in the Partnership Deed. It is not standard for all the partnership deed registration. Hence one needs to figure out the same with the help of an expert.
Once the deed is drafted on the stamp paper, take the drafted Partnership Deed to a notary public for notarization.The notary public will witness the deed’s execution and confirm the partners’ identity. It is one of the necessary formalities for doing partnership deed registration, hence don’t try to ignore the same.
Visit the Registrar of Firms
- Visit the local Registrar of Firms office, which is usually under the jurisdiction of the state government.
- Submit the notarized Partnership Deed along with the prescribed application form to the Registrar of Firms.
- Pay the required registration fees, which vary based on the capital contribution and the state’s fee structure.
- The Registrar will verify the submitted documents and may request additional information or clarification.
- Upon successful verification, the Registrar of Firms will issue a Certificate of Registration.
- While not mandatory, partners may choose to publish a public notice regarding the partnership registration in a local newspaper.
- Use the Certificate of Registration to open a bank account in the name of the partnership.
Conclusion
Partnership Firm and partnership deed registration are governed by the Partnership Act of 1932. It is a common and straightforward business structure in India, suitable for various business types. The Partnership Deed, a crucial document, serves as a contract outlining the agreed terms among partners. Key clauses in the deed cover aspects like capital contributions, profit-sharing, decision-making, and dispute resolution.
The partnership deed registration process involves drafting the deed, paying stamp duty, notarization, and submitting documents to the Registrar of Firms. Upon successful verification, a Certificate of Registration is issued, enabling partners to open a bank account and conduct business officially. Partnership firms offer ease of management and flexibility, making them a preferred choice for many entrepreneurs in India.
