A partnership is an agreement between two or more individuals or parties to work together for a common goal. An organization that is a partnership firm consists of at least two people who come together to conduct business. A partnership deed outlines the terms and conditions of such firms.
Let’s discuss what types of businesses can register as partnerships before we discuss how to register a partnership firm.
What types of businesses should register as partnership firms?
A sole proprietorship is a good choice for small businesses when one person is able to handle all the business needs. Small businesses often turn to partnerships as their businesses grow and require more than one skill set, such as a salesperson, a manager, etc.
The benefits of partnership firms include:
- Families with siblings, husbands and wives, parents and children, or cousins working together
- Law firms, construction firms, and other firms requiring a different skill set, managerial talent, and expertise
- For businesses who want to operate more freely without having to comply with several complex compliance requirements
- In addition, businesses with medium capital requirements, such as small manufacturing units, wholesale and retail trade, etc.
Partnership Deeds: What are they?
An agreement that specifies the terms and conditions of a partnership is called a partnership deed. Following are the details covered in the partnership deed:
- The firm’s business is currently being conducted or will be conducted
- Whether the partnership is for a limited period of time, such as 5-10 years, or for a specific project
- Names and addresses of the partners
- Name of the partnership
- When the firm began operations
- Each partner’s investment in the firm
- A partner’s share of profits and losses
- Removing or appointing partners according to the rules and regulations
- The partners’ responsibilities and obligations
- Partnership type
Process of Registering a Partnership Firm
A partnership does not have to be registered, but it is advisable since you cannot sue it in court without registration. There are a few steps involved in registering a partnership:
- To register a partnership, submit Form A to the Registrar of Firms along with the following documents:
- A copy of the partnership deed that has been duly signed and certified
- Stamp duties and fees required
- Once the registrar approves the incorporation, a certificate of incorporation is issued and the firm is added to the public records.
If you wish to get partnership firm registration online, you can consult your chartered accountant or hire a lawyer or register online.
Partnership Deed Benefits
- It is a formal agreement between two or more parties when it is written and registered. An oral agreement does not serve the same purpose as a partnership deed.
- Moreover, a partnership deed outlines the rules and regulations, as well as the profit sharing ratio, to be followed by partners.
- In a partnership deed, each partner’s details are clearly stated, preventing confusion among the partners.
- To resolve disputes, partners can refer to the partnership deed.
What Are the Checklist Clauses in a Partnership Deed?
- On a partnership deed, the company’s name and address are listed
- An organization’s partnership deed contains details about its partners
- Contribution of partners to capital
- Accounting period on a partnership deed
- Date of partnership formation
- A firm’s partnership deed specifies the rules of operation for bank accounts
- Ratio of profit-sharing
- Rates of interest on capital, loans, drawings, etc.
- A list of the rules for appointing auditors
- The partners’ remittances
- Each partner’s rights, duties, and responsibilities
- Dissolution rules & regulations to follow
- Admission, retirement, and the death of a partner are governed by rules and regulations.