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OVERVIEW



As we know partnerships, in the long run, can be complicated depending on the nature of the company and the number of partners engaged. For making sure that these complications and issues resolve quickly and smoothly, a partnership agreement is very important. A partnership agreement is a legal contract that governs the functions and operations of the company and divides the work of each partner. This legal document lays the groundwork for the partners of the firm that how the business will run. It establishes rules that how the business will be managed, about the ownership and investment of the firm, responsibilities of each partner, the division of shares, how can a new partner join, the decision-making process and resolving disputes, the type of the partnership and other important issues.


ESSENTIAL ELEMENTS OF PARTNERSHIP AGREEMENT

Every partnership agreement has some common elements, which is included in every partnership deed:

Name – it tells the name of the company

Purpose – it explains the purpose of the company

Partners' information – it includes the details of every partner i.e., name, address, contact numbers, etc.

Capital contribution – it describes the assets provided by each partner.

Ownership interest – it describes the ownership percentage of the company that every partner holds.

Distribution of profit and loss – this section tells us about sharing of profit and loss by each partner and how the firm will distribute its revenue.

Voting and management – it describes the decision-making process and the voting between the partners to resolve issues and the management of the firm by diving into the responsibilities and rights of the partners.

Adding and removing partners – it lays the rules for adding and removing a partner.

Duration of partnership – this section specifies the period of the partnership agreement. Some partnerships state that is lifelong, whereas it can also be for a shorter period.

Dissolution – it describes the sharing of profits and business when the company is dissolved. Partnership tax election – a partnership representative is chosen for all the tax-related matters of the firm

Death or disability – it gives clear guidelines of how a partner's ownership in the firm should be liquidated in the unlikely event of his death, insanity, or any disabilities.


TYPES OF PARTNERSHIP AGREEMENT:



A partnership agreement helps us to establish clear boundaries and expectations nevertheless it's a general, limited liability partnership agreement. These are mainly the three types of partnership agreement:


General Partnership: In this,every partner has a right to participate in the firm's management and operations and any loss done by one partner during business raise liability to all partners.

Limited Partnership: In this type of partnership, one must have at least one general partner and other limited partners. It includes both types. But the limited partner has a very limited role generally they serve as investors and are not personally liable for business, whereas the general partner takes up all the other responsibilities.

Limited Liability Partnership: It is a type of corporate form of practice. Each partner has limited liability and involvement according to their contribution to the business. In this type of partnership business owners aren't held personally liable nor they are responsible for other partners' actions.



ADVANTAGES OF A PARTNERSHIP AGREEMENT:


There are many advantages of a partnership agreement which are as follow:

1. Outline the business plan - The agreement outlines the business plan and helps to run the business smoothly if any confusion arises in the running of the business.

2. Divided responsibilities – The responsibilities are divided for every partner in terms of profit and losses in addition the management also runs effectively because of this.

3. Resolve disputes –The agreement already has clauses for solving disputes.

4. Outline entry plans –If any partner wants to bring another partner, he can easily do so by following the partnership agreement.

5. Outline exit plans – If any partner wants to leave in between the partnership. He can simply do so by the agreement without any dispute.

6. Reduce money-related disputes –Money-related matters can always create a dispute even in very good relations with partners. As the partnership agreement already has a resolution for this. In the starting only it clarifies the profit sharing and liabilities.



DOCUMENTS REQUIRED FOR PARTNERSHIP REGISTRATION:


1. Partnership Deed

2. Document of Firm

a. Pan Card of Firm – Form 49A should be filed to apply PAN.

b. Address Proof of Firm – If rented,

i) Rent Agreement

ii) One Utility Bill (electricity bill, water bill, etc.)

iii) NOC from Land Lord..

c. If own place,

i) Utility Bill mentioning the owner’s name

ii) NOC from owner, as mentioned in utility bill.

3. GST Registration

For obtaining it, a firm needs to submit PAN number, address proofs of the partners.

4. Current Bank Account

For opening a firm current bank account, the following needs to be submitted

a. Partnership deed

b. Partnership firm PAN Card

c. Address proofs of all the partners

d. Identity proof of all the partners

e. Partnership registration certificate (if registered)

f. Any registered document issued by CG or SG (e.g., GST certificate)

g. Copy of electricity bill, telephone bill, or water bill (not more than 3-month-old)

h. Authorization letter on the letterhead of the firm authorizing a partner as authorized signatory for a bank account.

5. Additional Document for Registration –

Partnership deed, ID and address proofs of the firm as well as the partners to the Registrar of Firms. With it, an affidavit certifying that all the documents are correct.


CONCLUSION



Under the above discussion, we can say a partnership deed is a legal entity that allows a business to run smoothly and safeguard the interests and rights of the partners. It easily solves the disputes arising in the firm without any bad effects or quarrels between the partners. As it is always better to have everything written down and drafted than just assuming every partner agrees with each other.