Before starting a business in collaboration with a partner(s) it is extremely important to form a water-tight agreement to make sure that all the partners are on the same page with respect to the firm’s understanding. The partnership agreement is such a legal contract between the parties in the partnership. It mentions the percentage of ownership of the partners, their share in profits, their liabilities, their rights, responsibilities and duties, the duration of partnership and conditions for termination of the partnership. A partnership is a less-formal operating structure than an incorporation; which can protect owners in the event of the death of one partner, a dispute, a sale to a new partner or the dissolution of the business, among other benefits.
1) Understanding the requirement of both/all the partners and the purpose for which the partnership is being proposed.
2) After this, a thorough discussion will take place between the partners to finalize the terms of the partnership deed.
3) After the discussion between the parties, a partnership deed shall be drafted by a professional skilled in the art. Then it will be given to the parties to review it and once the parties approve it, the deed is finalized.
As it can be appreciated, time taken for contract drafting depend largely on the complexities of the subject matter covered. But on an average, we conclude the process within 02 to 04 working days.
1) The name and address of the firm as well as the partners
2) Nature of business which is to be carried on
3) The date of commencement of the business
4) Duration of partnership as decided between the parties
5) Capital contribution by each partner
6) Profit sharing ratio as decided among the partners
As per the Partnership Act 1932, it is not compulsory to register a partnership firm. The firm does not have a separate legal identity and registration will not alter this fact. However, registration is the definite proof of the existence of the firm and its legality.
In the absence of a written agreement, partnerships end when one partner gives notice of his express will to leave the partnership. If you don't want your partnership to end so easily, you can have a written agreement that outlines the process through which the partnership will dissolve.
The major difference is that in a partnership, creditors can sue you personally to repay business debts, whereas if you form a corporate entity, such as a limited liability company (LLC) or an S-corporation, the debt trail ends with the business.