The days of doing business were simpler in the past, when people simply made a trade and honored their words! As a result, we have seen a long history of Deal-Breaking, complications arising from it, and lawsuits that have been filed all over the world.
It is for this reason that many businesses or professionals these days prefer to sign legal contracts before concluding a business deal. Over the past few years, Partnership Deeds have become more important than ever.
Partnership Deed: What is it?
A Partnership Deed outlines the terms and conditions of the partnership between the partners of the firm in writing.
Each partner’s rights, liabilities, and roles are outlined in it, as well as the role of the government. In order to ensure the smooth functioning of the firm, regulations should clarify the responsibilities of each partner.
Partnership Company:
General partnerships are corporations managed and operated by two or more people according to their partnership deed’s provisions and objectives. Because all partners in a general partnership are personally liable for the business’s debts, this structure is no longer considered relevant since the introduction of the limited liability partnership (LLP). Nevertheless, it is a sensible option for some businesses, such as home-based businesses that don’t take on debt, because of its low costs, ease of setting up, and minimal compliance requirements. General partnerships are not required to register
Importance of partnership deed:
Having a Partnership Deed is not mandatory in India under the Companies Act, 2013, but it is important for a variety of reasons:
- Partners in the business are governed by their rights, duties, responsibilities, and liabilities.
- Due to its simple operational functions, it prevents any misunderstandings between partners.
- Partners can easily settle disputes among themselves.
- Upon writing, the Deed becomes a permanent document that can be carried and used whenever necessary.
- Partnership Deeds can resolve a wide range of problems, such as disorders, conflict, and so many others.
- It is possible to present a deed to a bank or government if it is written. By the time demand of authorities, and third parties.
There can be no legal benefit from a Partnership Deed if it is not written or transcribed. For these reasons, a written document is always better than an oral agreement in order to reap the benefits.
The following documents are required for the Partnership Deed:
- Partnership Registration Application
- Copy of the affidavit
- Original partnership deed certified by the attorney
- Evidence of the location of the business
Features of Partnership Business
- A partnership business should have at least two members
- The maximum number of members in a banking business partnership is 10 or less
- A non-banking business partnership cannot have more than 20 members
- There is no minimum capital requirement for partnerships, as they can be started with as much capital as members want.
- Starting a business requires mutual understanding between partners.
- Any partnership deed should include the ratio of profit to loss before it is signed. Each partner or member is responsible for the actions of the other.
- As a register partnership firm, you do not need an auditor.
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