PARTNERSHIP DEED

The word Partnership can be used to describe the association of two or more persons in order to achieve a predetermined objective. It is the interconnection of people in order to achieve a common goal. The definition of partnership revolves around three elements namely: (i) there must be an agreement between all the concerned parties; (ii) the said agreement must also contain the provisions for sharing the profit of the business; (iii) finally the partnership business must be carried on by all the partners or any of the partner, acting for all.The terms “partnership”, “partner”, and “firm” are defined under Section 4 of the Indian 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.Persons who have entered into partnership with one another are individually called partners and collectively a firm, and the name under which their business is carried on is called the firm name.

The word partnership is a collective name used to describe some group of individuals of a firm. The firm’s name is a brief way of describing the partners of a firm collectively.

It is important to note that a firm is not a seperate legal entity but is only made up of the partners who join comprise it. Every partner is an agent as well as a principal in firm. As an agent, a partner can bind the other partners by his acts and as a principal he is bound by the acts of his fellow partners.

Before starting a partnership business, all the partners have to draw up a legal document called a Partnership Deed or Partnership Agreement. An agreement is pre-requisite for creating a Partnership.

There are two major legal processes involved in starting a Partnership Business; Registration of the firm and the drawing and Registration of Partnership Deed or Partnership Agreement. The former puts the firm into a set of rules and rights to be observed whereas the latter is an agreement between the partners of the firm governing their relations.

Registration of Partnership Deed

It is important to get the Partnership Deed registered with the Registrar to avoid any kind of problems and complications in the future. A partnership deed has to be registered in the office of the registrar. The registration of the firm is done in accordance with Section 59 of the Indian Partnership Act 1932. Registration of the firm or partnership deed is not compulsory and no penalty is imposed for not getting it registered. However, not getting a firm registered has few disadvantages concerning the rights of the firm. Some of the rights that the firm is deprived of as a result of its non registration are:

· Disputes involving partners: The partner cannot file a suit against the firm/partner for not adhering to any terms of the Partnership Deed/Act.
· Disputes involving a third party: No right under a contract can be enforced in the court against a third party in the name of the firm.

The basic documents / information required for the registration of the Partnership firm are as follows:
·         Name of Firm
·         Nature of Business
·         ID Proof such as Aadhar Card, Voter ID, Driver License or Passport of all the partners
·         Photographs of partners
·         Partnership deed
·         Ownership Documents such as Sale Deed, Conveyance Deed, Agreement to Sell etc of the office of the Firm
·         In case the office premises has been taken on lease or rent, Copy of Lease Agreement / Rent deed and NOC from
the landlord

Steps for Registration
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The steps involved in the Registration of a Partnership Deed are as follows:

1. The Partnership Deed is drafted / prepared by a legal expert / advocate / CA.
2. Stamp Paper is purchased for the execution.
3. Date is fixed for the registration in the Sub Registrar office.
4. The Government registration fee is paid.
5. All the Partners and 2 witnesses visit the sub registrar office on the fixed day for the registration of Partnership Deed.
6. The Registered Partnership Deed can be collected after a week.​

Stamp Duty

The Partnership Agreement contains some important elements which are written over a Stamp paper. The stamp paper of the required amount is bought and the agreement is printed on it.

The stamp duty on Partnership Deed has to be paid as per Article 46 of the Indian Stamp Act, 1899 which varies from State to State. In Delhi, the minimum stamp duty payable on Partnership Deed is Rs.200.

Contents of a Partnership Deed
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The important details to be provided in a Partnership Deed / agreement are as follows:

• Names of Partners – includes the names and details of all the parties
• Commencement of partnership– mentions the date from which the partnership shall begin. 
• Duration of partnership – mentions how long the partnership should last for. It is automatically assumed that the death of one of the partners breaks the contract, unless otherwise mentioned.
• Business to be done – species exactly what kind of activity will be carried out by the partnership. This section should be very clear and specific to avoid any sort of confusion in the future.
• Name of the firm – mentions the name under which the firm shall carry its business.
• Initial investment/ capital – specifies  what amount each partner shall invest by way of capital.
• Division of profits and losses – mentions what percentage of profits and losses each partner will receive. 
• Ending of the business – mentions what happens when the business is closed down. Usually this includes three parts: 1) All assets are liquidated into cash and divided among the partners 2) one partner may purchase the others’ [partners shares  3) all property of the firm is divided among the members.
• Date of writing / execution of deed – specifies the date on which the partnership deed was written and executed.

Since a minor is not capable of entering into any contract, he cannot be made a partner in the firm. However, he can be admitted to the benefits of the partnership and have access to the accounts of the firm. He shall have a share in the profits and property of the firm but he cannot be held personally liable for any acts of the firm.

While choosing the name of a Partnership Firm, care must be taken that it is not similar and does not resembles the name of an existing Firm or Company operating in the same line of business so as to avoid any confusion. Further, words such as Crown, Empire, Emperor, Government or any other word indicating any connection with the Government should also not be used.

If the partnership is at Will, any partner can dissolve the firm by giving a notice to that effect.

FAQs

Q. A partnership firm consists of 2 partners. Will it be necessary for both the partners to visit the sub registrar office for the registration?
A. Yes, it will be necessary for both the partners to visit the sub registrar office for registration of partnership deed.

Q.How much time does it take to get the partnership deed registered?
A. The registration process takes around 6-7 days’ time.