A partnership is a relation between persons who have agreed to share profits of the business carried on by all or any of them acting for all.
ESSENTIAL ELEMENT IN PARTNERSHIP:
- An association of two or more persons.
- An agreement between all the parties
- Such agreement is to share the profits of a business
- Business must be carried on by all or any one of them acting for all.
A partnership deed is an agreement between the partners of a firm that outlines the terms and conditions of partnership among the partners. The partnership deed serves many purposes which we will understand after having a look at a sample of the partnership deed.
PARTNERSHIP DEED– SAMPLE
This Deed of Partnership is made at Navi Mumbai on this 22nd of March,2021 between:
- Prajwal Joshi aged about 34 years, resident of India hereinafter called the Party of the First Part,
- Suvrat Jog aged about 29 years, resident of India hereinafter called the Party of the Second Part,
Whereas the Parties hereto have mutually decided to start the business of Manufacturing of refinery oil on such terms and conditions which are appearing here-in-after:-
NOW THIS DEED WITNESSETH AS UNDER:
(1) That the business of partnership shall be carried on under the name Shivam Refinery oil (SRO) which is found suitable by the partners.
(2) That the business of the partnership shall be carried at Seawoods, Navi Mumbai, mutually agreed upon by the partners.
(3) That the business of partnership shall be Manufacturing of refinery oil.
(4) That this partnership shall be effective from the 22nd of March,2021.
(5) That the net profit of the partnership business after deduction of all expenses relating to business activities including salaries and other establishment expenses as well as interest and remuneration payable to the working partners in accordance with this deed of the partnership shall be divided and distributed amongst the partners on the close of an accounting year in the following ratio:
- a) Prajwal Joshi – Party of the First Part 50%
- b) Suvrat Jog – Party of the Second Part 50%
The loss, if any, including loss of capital suffered in any year shall also be apportioned in the above ratio.
(6) That the Partners contribute initially a capital Rs. 10,000 each. Further partners shall contribute capital according to the needs of the business as may be mutually agreed upon. Partners shall be entitled to receive interest on the capital invested or any other sum that may be introduced hereinafter in the partnership at the rate of 12% P.A. or as may be prescribed under section 40 (b) (iv) of the Income Tax Act, or any other provision as may be applicable in the relevant accounting period. However, in case of loss or lower Income or otherwise, the rate of interest can be lower than 12% or can be nil as may be mutually agreed to between the partners.
(7) That both the partners are working partners and it is hereby agreed that each of them shall be entitled to an annual remuneration of
a) Prajwal Joshi – Party of the First Part 300000
b) Suvrat Jog – Party of the Second Part 30000
for being working partners. The aggregate of remuneration payable to the working partners shall, however, be proportionately restricted to an amount which shall be worked out as under:
a)In respect of book profits of the firm up to Rs. 3,00,000/-,90% of such profits.
b) In respect of the book profits exceeding Rs. 3,00,000/-, 60% of such profits.
8)Provided, however, in case of the book profits not exceeding Rs.1,50,000/-, the whole of such profits may be payable as remuneration to the working partners
9)Provided further, that in case of the book profits exceeding Rs.1,50,000/-, the working partners may be paid a minimum aggregate remuneration of Rs. 1,50,000/
10)Provided further, that in case of no book profits or in case of a loss, the partners may if so mutually agreed upon by both partners of the firm, draw an aggregate remuneration of an amount not exceeding Rs. 1,50,000/-.
11)For the purposes of the above computation, “book profits” shall mean ‘book profits’ as defined in Explanation 3 to Section 40(b) of the Income Tax Act, 1961, or any other relevant provision that may be applicable for the assessment of the partnership firm for the relevant accounting year.
12)That proper books of account shall be maintained by the partnership firm and entries of all such transactions and things as are usually done shall be made therein. The said books of accounts and all letters, papers, and documents belonging to the firm shall at all times be open to inspection by the partners who shall be entitled to take extracts and copies thereof.
13)That the final accounts of the partnership shall be taken on the 31st day of March each year during the continuance of the partnership business and all the assets and liabilities and profits and losses shall be worked out and the accounts of the partners shall be debited or credited accordingly.
14)That no partner shall without the consent in writing of the other partners sell, assign and mortgage or otherwise transfer his share of interest in the partnership business to any other person.
15)That no partner shall be responsible for the personal debts of the other partner.
16)That the partners shall be just and faithful to each other in all transactions and at all times be responsible to give the other a true and faithful account of the affairs of the partnership.
17)That the bank account of the partnership shall be operated under the individual signatures of any of the partners of the partnership herein constituted.
18)That any partner desiring to retire from the partnership business shall be required to give three months’ notice in writing to the other partner of his intention to retire. On dissolution of the firm, the assets and liabilities shall be determined and the retiring partner shall be paid the share found to his credit.
18)That if any partner retires or dies, his legal heir/heirs may be taken as a partner in the firm, if agreed to by the other partner.
19)That in case of any dispute or difference between the partners or their representatives about the interpretation of this deed, whether during the continuation of the partnership or at any time thereafter, the matter shall be referred to an arbitrator whose award shall be conclusive and binding on the partners.
In Witness whereof the parties have set their hands to this Deed of Partnership at the place and date written here-in-above.
PARTY OF THE FIRST PART — Mr. Prajwal Joshi
PARTY OF THE SECOND PART— Mr. Suvrat Jog
- Kabir Taneja
- Tanya Kashyap
Author: Akshada Sarpande,
MIT School of law, student of FY BBA LLB