Table of Contents
What is Partnership Deed
Contents of partnership deed helps for formation and regulation of partnership business. As you know partnership agreement can be made in oral form, but always it is recommended that every agreement should be in written form for better resolving the issue (if any occur in future). Deed should be on the legal papers with proper attestation and be completing the basic requirement of law.
As per Partnership Act Partnership deed is compulsory in case of registration of firm. The deed should be dully stamped and sealed documents. Also get signed and attestation from the court. Stamp paper should meet the minimum requirement of the government for validity of it.
Importance of Partnership Agreement
Just like, before starting a travel. if every passenger now, whats the purpose of journey, where they are going, who will lead, where will stay, the duration of it, cost of it, then it will be more effective. Same like that if each and every thing defines at the start of the business, then it give empowerment in business. Which leads towards growth and development with the clear and efficient mind.
Basic Contents of Partnership deed.
1-Commencing and operating Date:
In Deed, it should be mentioned when the agreement is being made and the starting date of partnership. This helps from any legal action before starting date of partnership.
2-Name of business:
Trade name should be decided by all partners with their consent. The name should be that which is available and not registered by any other. The name should not contradict from the business activities. Example Construction business name should not lead to oil business image.
3-Objective and nature business:
The Basic objective is to earn profit but how, what kind of business will be doing, Trading, manufacturing, profession and its nature. Also clarify what kind of trading, manufacturing or giving services. Boundary of business should be set first.
4-Liability of the partners
Partners liability is unlimited in general partnership. however, if it is a limited liability partnership, at least one partners will be liable for all debts as per partnership act. In Deed it should be clearly defined about each partner liability status. In the absence of it, it would be assumed all partners are liable.
5-Profit and loss Ratio
The share which partners will get how many shares of profit and loss. it can be as per ratio of capital investment or mutually agreed shared.
6-Operation and Manufacturing Area,
Where will be head office and manufacturing of goods etc. place, city. and in case of necessary what action will be required. As in Registered office clause of memorandum of Association, here Registered office need to be defined for future correspondence.
7-Capital and Financing,
Should every partner invest the finance or some one’s skill can be an alternative to capitalism. In the case of finance requirement how capital will be raised and up to what rate of interest.
How many partners will be, Their name and address, National Identity Number with father name and also describe about the types of partners.
In general cases partners, are not entitled to get the salary, however with the consent of all partners, partner can assign extra duty and salary or commission paid for those services.
10-Interest on Capital
It will be paid to any partner or not. That may happen in certain cases, that profit and loss is shared on an equal basis and agreed that if any partner invests more that equal investment of each partner he or they will get agreed percentage of interest on it.
11-Partners’ Death, Accident, Insolvency,
In case of death or insolvency, what actions will be required. Whether minor is accepted or will not be, and how to deal with an insolvent partner.
12-Any change in partnership:
How to deal with any change in partnership, whether the consent required from all partners or a prescribed number of partners.
13-Bookkeeping and Auditing:
For recording and updating the accounts, which system will be adopted, a single Entry System or double Entry System. Manual or via software or both. and from where an audit of accounts will be undertaken. So the finance system should be updated and for minimizing the chance of fraud. Books of accounts play a vital role in financial decisions.
14-Insurance help in minimizing the loss.
Whether avail this opportunity or not, if yes then from where and up to what level. Insurance helps in case of loss, It give support from loss coverage.
It should also be prescribed in the deed. If it is a Particular partnership or Joint venture nature, then it will automatically be dissolved at the completion of project or time.
Contents of partnership deed can be more described in the agreement with the will of partners from avoiding any dispute in future. It can be simple one or may be comprehensive, However its better to share rules and regulation at the start of the partnership so each partner can work smoothly for the development of business.