Suppose you and two of your classmates want to start a partnership business after completing your education. Draw up a partnership deed of your proposed business.
Answers
Answer:
A partnership agreement or deed also referred to as a partnership agreement, is a legal agreement between two people or more than two when they come together to form and run a company. The deed lays down all the important terms and conditions pertaining to the business. Some of them include the rules and regulations of the business, obligations, employee salaries, exit procedures, entry of new partner/s, the ratio of sharing profit/loss, etc. This document is highly crucial if the partnership firm goes to court for some reason because it can be presented in court as a legal document. The partnership deed registration is done under the Indian Registration Act 1908. The partnership deed registration is necessary because it is only after registration that the organization can apply for PAN, open a bank account, and obtain a GST registration or FSSAI license in its name.
Explanation:
Though there is no standardized format for drafting a partnership deed, there is certain information that should be included in the partnership deed.
They have the following:
The primary objective of the partnership: The deed should contain the partners’ names and addresses and all other necessary details that will help explain the nature of the business to be done by the partners.
The location of the partnership business: It should also contain where the firm will run its operations, i.e., the location/s as agreed upon by the partners from time to time.
The duration of the partnership: The partnership deed should also contain the date of formation of the partnership firm and the course of the deal.
Contribution of capital: It should also contain the contribution of the firm’s property, cash, capital, goods, or services in the agreed-upon value.
Withdrawal of capital: Also, it should contain the details pertaining to the drawing policy allowed to every partner and whether the partner needs to pay any interest to the firm upon such drawing.
Details of salary and commission: The partnership deed should mention the details pertaining to the percentage of the ratio of the compensation and commission to be paid to the partners.
The profit and loss ratio: The percentage of profit and loss sharing by the partners should also be mentioned.
Regulation for dissolving the partnership: Also, details of the account/s of the firm and how it will be treated in case the firm gets dissolved should be mentioned in the partnership deed.
Rules for admitting a new partner: Rules pertaining to the admission of a new partner, retirement or death of an existing partner, and exit of a partner should be laid down.
Rules to abide by The guidelines that need to be followed in case a partner goes bankrupt should be mentioned in the partnership deed.
Details of audit and account: Correct and complete books of account pertaining to the transactions made by the firm from time to time should be readily available and should be open to the partners for inspection and examination. The method of preparing the partnership firm’s accounts and the audit arrangements should also be mentioned.
Partner’s voluntary withdrawal: Rules pertaining to the voluntary withdrawal of a partner should be stated in the partnership deed.
Duties and responsibilities of the partners: The division of roles and responsibilities of the partners should also be clearly stated.
Banking details: The funds held in the firm’s name will be kept in a bank account as jointly decided upon by the partners.
Borrowings: Written consent from all the partners will be needed for taking bank loans or loans from other financial institutions or third parties to meet the firm’s financial needs.
Financial Year: The financial year of the partnership should also be mentioned.