How to create a Partnership Firm?

It is really simple to open a Partnership Firm. Here in this article, we will describe in simple words, the process for the creation of a Partnership Firm. 

Step 1: Arrange the Basic KYC Documents of Partners

Step 2: Make a Partnership Deed

Step 3: Get the Partnership Deed printed on the Stamp Paper

Step 4: Make an application for PAN and TAN

Step 5: Open a Bank Account

And it is all done

Now Let us understand all above steps in details:-

Step 1: Arrange the Basic KYC Documents of Partners

Following documents and information needed:-

1. PAN of all the Partners (Minimum Two Partners are needed to create a Partnership Firm)
2. Aadhar of all the Partners
3. Name of the Partnership Firm
4. Objectives/ Nature of business of the Firm

Step 2: Make a Partnership Deed

The Partnership Deed needed to be drafted for creation of the Partnership Firm. The Draft format of the Partnership Firm is given in the bottom of this article.

Step 3: Get the Partnership Deed printed on the Stamp Paper

The stamp paper rules for Partnership vary from State to State.

But in general for a normal Partnership Firm, the stamp paper of Rs. 200 can be used.

So after the draft is prepared and checked thoroughly the same needs to be printed on the stamp paper and the same needs to be notarized from the Notary.

Step 4: Make an application for PAN and TAN

After the process of Stamp paper and Notarization of the Partnership Deed. We need to apply for the PAN and TAN of the Firm.

The application for PAN and TAN can be made online as well as offline.

Online PAN Application Link –

https://www.onlineservices.nsdl.com/paam/endUserRegisterContact.html

Online TAN Application Link –

https://tin.tin.nsdl.com/tan/form49B.html

Step 5: Open a Bank Account

This is the last step in the Formation of a Partnership Firm. After the PAN allotment, the bank account should be opened in the name of the Partnership Firm for its Business Activities.

And the Partnership Firm is ready for Business Activities

Important Note

The process above described should only be used under the guidance of a tax expert because there the Partnership Firm can be made in two ways, the first one we described above and the second is a different process, where the partnership deed needed to be registered in the office of the Registrar. So it is better to understand what is suitable for the business.  

………………………………………………………………………………………………

Draft Format for Partnership Deed

PARTNERSHIP DEED 

THIS DEED OF PARTNERSHIP IS EXECUTED ON THE ……………………..BY AND BETWEEN:

 …………………………………. ……. S/o ………………. ………. …………… …………… ……… R/o ……………………. …………… . ……. ………………. ……………….. ……………. ………………. …… ………., hereinafter referred to as party of the First Part (which expression shall deem and include his heirs, executors, administrators, representatives, assigns),..

AND

………………………. ……………… ……. S/o ……………. …………. ……… ……………….. ……… R/o ……………………………………. ……. … ……………… …………………… ………………… ……………….. …………….. ., Party of the Second Part (which expression shall deem and include his heirs, executors, administrators, representatives, assigns),

WHEREAS the above named partners have decided to start the partnership business under the name & style of ……………. . … .. ……………………… …………………… ………… . with effect from ……… ……………..on the terms and conditions hereinafter mentioned and have desired the terms and conditions into writing.

NOW THIS DEED OF PARTNERSHIP WITNESSETH AS UNDER: –

1. THAT the PARTIES referred above shall carry on the business under the name and style of “………………. ……….. ……………… ……………. …….” at the Address …………. . ………………. …………….. …………. …………. ……… , But by their mutual consent may start and carry on any other business under any other name or names at any other places or places.

2. THAT the business of the PARTNERSHIP pursuant to this DEED of PARTNERSHIP shall be deemed to have commenced with effect from ……………….

3. That the Partnership business shall be that of …………. ……. …………………………………………………………………….. …….. …………………………………………………………… ……………… …………… . …………..

4. That the duration of Partnership will be as mutually decided by both the partners but there shall be no retirement or admission or dissolution until confirmed by both the partners.

5. That the Profit or Losses, as the case may be, of the Partnership business shall be divided among the Partners as under:
   NAME OF WORKING PARTNER SHARE OF PROFIT/LOSS
   1.
   2.

6. That regular books of accounts shall be kept for all the business wherein all the business transactions shall be regularly and duly recorded which shall be kept at principal place of business and shall be open for inspection at all reasonable hours for all the partners.

7. That all partners shall carry interest at the rate of 12% per annum or such other rate as may be mutually agreed upon by all the partners. Such interest shall be calculated and credited to the account of each partner at the close of the Financial period. The partners are here for the making a partnership for disbursement of loan amount which be taken by all the partners. The partnership firm is carried for the purpose of business and it shall be continue for a foreseeable period.

8. Bank Accounts

• That the bank account(s) shall be kept at any of the scheduled or non-scheduled bank In the name of the Partnership firm.
• The Banks account(s) shall be operated as follows:-
  Jointly & Severally by all the Partners.
  The bank account is opened on the name of firm is operated by all the partners with mutual consent and all transactions done by is mutually consented by all the partners by taking advice from other partners of the firm.
• Notice shall be served to the Bank(s) at the time of death, removal or retirement of any of the partner(s), and his authorization to sign in the bank(s) shall be invalidated.

9. That the capital of the Firm shall be the contributions made by the partners as follows:
   Partners Name
   Contribution of Capital

10. That for obtaining any Registration, License, Tender, Permits under any act or authority documents required for filing for such shall be signed and executed by the all of the Partners.

11. That the accounting year of the firm shall be ended on 31st March of each Financial Year. On which or on the day of convenient, complete accounts shall be made including the Profit & Loss Accounts and the Balance Sheet and the Net Profit shall be credited to the personal accounts of the all the partners. However if there is any Loss same shall be debited accordingly.

12. That all the partners shall attend the business most honestly and shall give complete account of the dealing to each other, and conceal nothing. And shall not use any of the Firm’s property for personal benefit and shall not give to any person except in the due course of business.
13. That no partner shall do any such thing which throws the property to the danger of being seized, attached or taken into execution.

14. That the partners are authorized to borrow jointly on behalf of partnership if any Loan is required.

15. No partner or the Partnership firm shall be liable and/or responsible for the personal debt and/or liabilities of any other partner or partners.

16. That in the event of dispute with regard to the terms and conditions of this partnership deed, the matter shall be referred to single arbitrator appointed by all the partners and the decision of the arbitrator so appointed shall be final and binding on all the partners.

17. That without prejudice to the above terms and conditions the partners shall in all other matters be governed by the provisions of the Indian Partnership Act, 1932 and any amendments thereof.

18. That further finance required for the purpose of business of the firm shall be contributed by the parties in such ratio as may be mutually agreed upon. Interest rate as may be mutually agreed upon between the parties from time to time shall be allowed on the Loan standing to his/her credit for the time being in the books of the partnership.

19. That all the assets and liabilities of the firm as on tangible or otherwise, would be taken over by the Partnership at its book value and shall be deemed to be assets and liabilities of this Partnership and all the Parties hereto will have equal rights/liabilities thereon.

20. That each partner shall: –
    • Diligently attend to the business of the Partnership and devote his/her necessary time and attention thereto.
    • Punctually pay her/his separate debts and indemnify the other partner and the Assets of the firm against the same and all expenses, therefore.
    • Upon every reasonable request inform the other Partner of all letters, accounts, writings and such other things which shall come to her/his hands or knowledge concerning the business of the partnership.

21. That neither Partner shall without the consent of the others: –
    • Lend any of the money or deliver upon credit any of the goods of the firm to any person or persons whom the other Partners shall have previously in writing forbidden her/him to trust.
    • Raise or advance any loan in the name of or on behalf of the firm.
    • Assign, charge or transfer her/his shares in assets or profits of the firm.
22. That any partner may retire from the Partnership firm, hereby formed by giving two months notice in writing to the others but none shall leave the firm until or unless all the pending commitments are carried out, liabilities paid off, assets realized and accounts are rendered fully and settled finally to the entire satisfaction of each of the parties hereto.
    
    
23. That the parties hereto may, however, with their mutual consent pay  remuneration to any of the parties hereto at a rate that may be mutually agreed upon between them from time to time. They shall be at liberty to increase or decrease such rate of remuneration with their consent from time to time.
    
    
24. That in the event of death or retirement of any of the parties hereto the partnership firm hereby formed shall not dissolve, but shall continue. The legal heir or the representative of the deceased shall step into her/his shoes.
    
    
25. The operation guideline shall be separately maintained and updated from time to time upon mutual consent of the partners and duly signed by both the partners.
    
    
26. That upon the dissolution of the partnership in any event not hereinafter provided for the said business, the assets, goodwill and liabilities shall be equally divided between the partners at the time of dissolution.

IN WITNESS WHEREOF the above said parties after having fully under stood the contents of the Deed, have put their names on the day month and year as said above in the presence of the following witnesses.

WITNESSES SIGNATURE OF THE PARTY