What does a partnership deed record?
A partnership deed is the written agreement of the partners. It records who the partners are, what capital each brings, and how profits are shared. Company Suggestion drafts it for the partnership. Registration of the firm is a later, optional step.
What is a partnership deed?
Section 4 of the Partnership Act defines a partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The deed is that agreement put in writing. It is the document a bank, a supplier, or the income-tax department asks for when the firm has to show the profit share.
Which clauses does the deed need?
- The name of the firm, the business, and the place where it is carried on.
- The name and address of every partner, and the capital each one brings.
- The profit-sharing ratio, including losses, and the rules for drawings.
- How a partner is admitted, retires, or is expelled, and how the firm is dissolved.
- Who operates the bank account, and how a dispute among the partners is decided.
The yearly filings that follow a registered firm are on the partnership compliance page.
How is the deed signed?
The deed is printed on stamp paper. The duty is the duty the state charges for that instrument under the Indian Stamp Act. Every partner signs it. A notary’s attestation is a witness to the signatures. It is not registration with the Registrar of Firms.
Stamp, then sign. The duty follows the state. Every partner signs the same deed.
Does the firm have to be registered?
Registration with the Registrar of Firms is optional. Section 69 stops an unregistered firm from suing to enforce a right arising from a contract, against a third party or against the other partners. The application, where the partners choose to file it, goes to the Registrar of the state where the firm sits, with a certified copy of the deed.
A business with more than 50 partners cannot stay a firm. Section 464 of the Companies Act requires that business to be a company or an LLP.
Frequently asked questions
Four questions cover an oral agreement, registration, the number of partners, and the firm’s PAN.
Is an oral partnership valid?
The Partnership Act allows a partnership by agreement, including an oral one. A written deed is what banks, the tax department, and the Registrar of Firms will accept when the firm has to prove the profit share.
Is registration of the firm compulsory?
No. Registration with the Registrar of Firms is optional. An unregistered firm cannot sue to enforce a right arising from a contract.
How many partners can the deed name?
The deed needs at least two partners. A firm of more than 50 persons cannot carry on business. That business has to be a company or an LLP.
Does the deed replace a PAN?
No. The firm applies for its own PAN. That application is separate from the stamp paper and from registration with the Registrar of Firms.
Sources
The deed and registration sit in the Indian Partnership Act, 1932. The firm’s formation is on the partnership page.