As per Section 4 of The Partnership Act, 1932: “Partnership” is 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.
Components of Partnership:
Persons who have agreed to enter into partnership are called individually, “partners” and collectively “a firm”, and the name under which their business shall be carried on be called “firm-name”.
Reasons to set up a Partnership Firm:
- Easy to Incorporate
- Less Compliances
- Sharing of Profit and Loss
- Quick Decision
Checklist for formation of Partnership Firm and Partnership Deed:
- Minimum two members as partners
- Maximum of equal to or less than twenty partners
- Name of the Firm
- Firm Address
- Business of the Firm
- Partners KYC
- Profit Sharing
- Partnership Deed
- PAN card and bank account of the firm
Format of Partnership Deed
This Deed of Partnership executed at _________ on this _____ day of _________ 202_ by and between
- ______ D/o ___________ aged ____ years, resident of ___________.
- ______ S/o ___________ aged ____ years, resident of ___________.
herein after referred as partners which expression shall mean and include their legal heirs, executers, Administrators, Representative and or assignees.
Whereas the above parties proposed each other a proposal on _______ 202_ and decided to carry on activities and execute a written instrument deed of partnership effective from _______ 202__. Therefore, the business / professional activities will be carried on by the partners as per the deed of partnership smoothly under mentioned terms and conditions and it is expedient to execute a written instrument of partnership deed. Now this is instrument of partnership is witness as under: –
1. NAME, STYLE AND PLACE OF BUSINESS: – That the parties hereto have mutually agreed to carry on and will carry on the business in the name and style of “_________” and shall have the Registered office at ___________ and provided that the parties hereto may mutual agreed to carry the Nature of business in the field of
The place of business shall be carried in the registered premises and other branch offices, if any.
2. PROFIT & LOSS: – The net profit share ratio will be which is written here-in-under. Net profit will be ascertained of the partnership business as per the accounts maintained by the partners after deduction of all expenses relating to business operation and its management activities and business of the partnership including rent, salaries and other establishment expenses, any other expenses relevant to the business as well as interest and remuneration payable to the partners in according with this clause of the deed of partnership on the close of the accounting year. The Net Profit will be distributed equal profit-sharing ratio and Profit / Loss shared as per Point No.18 among two Partners.
3. NATURE OF BUSINESS: – _____________
(Provide in detail)
4. DATE OF AGREEMENT: – The Partnership shall come into effect from ____________ and shall be for an indefinite period unless it is determined
5. CONTRIBUTION: – The capital of the partnership shall be INR ____/- (Rupees __________ only) from each of the Partners and overall Capital Investment is INR _____/- (Rupees _________ only)
6. DURATION: – That the duration of partnership is not fixed and it shall be partnership at will.
7. CONFIDENTIATLY: – The whole idea and concepts will be Highly Confidential and it is the every partner’s responsibility to maintain the confidentiality and not reveal/execute any idea to any of their family/relatives and friends.
8. ACCOUNTS: – That the firm shall regularly maintain, in the ordinary course of business, a true and correct account of all its incomings and outgoing and also of all its assets and liabilities in proper books of accounts, which shall ordinarily be kept at the firms place of business, and final accounts shall be prepared once in every year on 31st March for determination of profits and losses of business carried on by the firm and a balance sheet prepared of the firm asset and liabilities as on that date which shall be signed by the parties here to and copy which shall be supplied to each part. Every party shall have access to the books of accounts, and the right to verify their correctness at reasonable time during the business hours.
9. CAPITAL CONTRIBUTION AND INTEREST ON SUCH CAPITAL: – Partners herein agreed to contribute INR _______/- (Rupees ________ only) upon the starting of the business and be distributed in equally from all the partners towards their share of capital. Further, capital as and when required shall be contributed by the parties herein and such additional capital from the respective partners and respective share pattern will be changed through amendment.
a) DRAWINGS: – The drawings by the partners as per the share holding pattern.
b) DIVISION OF PROFIT AND LOSS: – The Net profit and loss after charging all the usual Business out – goings including Salary, Interest, Remuneration, and Allowance to Partners (if any) shall be divided among the partners as mentioned above.
10. BANK ACCOUNTS: – Account may be opened in Bank or Banks as decided by the partners. The accounts so opened shall be in the Name of the firm only and shall be operated by all the partners on behalf of the firm.
11. WITHDRAWALS: – Each Part shall be entitled to draw out of the partnership business any sum or sums of money based for their own use by mutual consent of all the partners and such sums to be duly accounted for on each succeeding settlement of account and division of profits of partnership and any excess of the drawing found on such settlement shall be refunded.
12. BORROWINGS: – If at any time, further funds are required for the purpose of Business, such amounts shall be borrowed from the partners as distinguished from their capital contribution from Bank or financial Institutions or Outsiders. The Interest payable on such loans shall be a charge against profit or loss of the firm. The necessary documents for obtaining the loan shall be signed by the Partners decided time to time, for and on behalf of the firm.
13. ARBITRATION: – In case, of any Dispute among partners, the same shall be referred to an Arbitration Body, which shall consist of an Arbitrator, nominated by each partner. The Decision of the majority of the Arbitrators shall prevail, and no suit for the similar be filed in a court of law.
14. POSTAL COMMUNICATION:- All the partners will be authorized to receive and send all postal communication, Money orders, Registered posts, value payable by post (VPP), authorized to sign all Letters, forms and other Declaration, Affidavits, for and on behalf of the firm.
15. TERMINATION OF PARTNERSHIP:- The partnership may be terminated by any one of the partners, by giving the other partners’ 3 calendar months’ notice in writing of his intention to have the partnership terminated and on the expiration of that period of 3 months, this agreement is said to stand cancelled and accordingly, each of the parties hereto sharing the profit or loss as provided in clause (10) supra. Shall have capital account adjusted after preparing statements up to the Date of Retirement and the Amount standing to the credit of the Retiring party be paid to him, within such period of time as agreed to by the parties.
The Retiring party is not eligible to get any additional amount, as a share of good will or an increase in value of the immovable properties of the firm.
16. MANAGEMENT: – All the Partners reserve the right / entitled to carry on the firm’s Business and to carry all the necessary procedures, activities to operate the business and involve in the day-to-day affairs of the Business.
17. SALARY TO MANAGING / WORKING PARTNER: – The partners may also be entitled to Salary, Remuneration, Fees, Allowance, and Bonus or commission any or all the working partners of the firm who are actively engaged in the business of this firm such Salary, Remuneration, Fees, Allowance, Bonus or Commission may also be provided on the basis of Consultancy or other type of service provided by the partners to the firm
18. SHARE OF PROFITS & REMUNERATION: – The Profits & Losses of the firm shall be shared in the following ratios:
- Partner A: 50%
- Partner B: 50%
The remuneration of per Month payable to the above said Each partner & shall be computed in the manner laid down in explanation 3 to section 40(b) of the Income Tax Act 1961 or any other applicable provision as may be in force in the I.T. assessment of the PARTNERSHIP FIRM of the relevant accounting year. Such amount shall be distributed between the said working partners in their profit / loss sharing ratio. Such remuneration shall be calculated at the close of the accounting year and shall be credited to the account of each working partners. The working partners shall be entitled to withdraw out of remuneration for their personal needs from time to time.
19. DEATH, RETIREMENT, INSANITY OR INSOLVENCY OF ANY OF THE PARTNERS:- In case of death or retirement of the partner / partners, the heirs of the deceased partner/ partners shall be paid such sum as may stand to his capital /current account. However, in case of death of the partner/ partners, the heirs or the nominee of said deceased partner / partners may be taken as partner / partners in the said firm to the extent of the shares of the deceased partner / partners and the firm shall continue the business as usual.
20. PERSONAL LIABILITIES OF PARTNERS: – The firm shall not be liable in any case, in respect of the personal borrowings made by the partners on their personal capacity.
a) Any of the above terms shall be varied or altered by the partners, according to the circumstances and benefits arising to the firm and all partners of the firm.
21. DISSOLUTION: – At the time of Dissolution all the assets of the firm shall be realised and all the liabilities shall be met and the capital shall be repaid. Any Excess/Shorts shall be distributed among the partners in their profit-sharing ratio.
22. AMENDMENTS AND DISPUTES: – That the partners from time to time can alter and amend any of the mentioned clauses by mutual consent. That disputes if any arising out of this deed shall be subject to the jurisdiction of courts at ___________.
That for all other matters not specifically mentioned in this deed of Partnership, the provisions of Indian Partnership Act shall apply.
IN WITNESS WHEREOF, the parties above named have signed this DEED OF PARTNERSHIP on the date aforementioned in the presence of the following witnesses.
- (FIRST PARTNER)
- (SECOND PARTNER)