Activity 2: Considerate the necessity for formulating Partnership

Deed

Imagine you and your friend/acquaintances, have a new business of selling Sanitation Equipment’s
under “Covid-19 Prevention Scheme” as a partnership firm.

1. Give a suitable name to your partnership business.

2. Prepare a partnership deed for your business in order to avoid any disputes in future.
3. A specimen format of the deed is attached hereunder. You are free to add any more
provisions to it, if necessary.
 E-stamp Certificate No. ……………………

PARTNERSHIP DEED

This DEED OF PARTNERSHIP (hereinafter referred to as “the Deed”) is made on this …..th day of
………….., 2019 at Sate of by and between:

a. Mr. ……………………….. S/o Sh. ………………………….., resident

of
…………………………….. Sate of - 110029, (hereinafter referred to as the first partner) of
the FIRST part which expression shall include his legal heirs, assigns etc.;
And
b. Mr. ………………………….. S/o Sh. ……………………………………, resident of
………………………….., Sate of - 110029, (hereinafter referred to as the second partner)
of the SECOND part which expression shall include his legal heirs, assigns etc.

The First partner and the Second partner, shall hereinafter individually be referred to as “the Party
“ and collectively be referred to as “the Parties”.

1. WHEREAS the parties have mutually agreed upon to carry on the business of
…………………………………………………………………… including ……………….., in any
manner whatsoever in India as per details given in clause 5 hereinbelow under the terms of
this deed.

2. AND WHEREAS, the parties have mutually decided to actively devote their time and
attention to the nature of activities defined in this deed.

3. AND WHEREAS the parties have agreed to contribute in the capital of the Firm in their
respective proportion as and when required.

NOW THIS DEED IS WITNESSETH AS UNDER:

 E-stamp Certificate No. ……………………

NAME & STYLE

1. That the business of the partnership shall run under the name and style “……………………..” or
such other name & style as the partner may agree upon from time to time (hereinafter
referred to as “the Firm”).

PRINCIPAL PLACE OF THE BUSINESS

2. That the principal place of business of the partnership shall be located at

………………………………, Sate of - 110057. However, the business may be conducted
from such other place or places as may be mutually agreed upon between the parties from
time to time.

BRANCH

3. That the firm may open any branch(es) at any time at such location(s) with the mutual consent of
the parties.

EXISTENCE

4. That this partnership business shall be deemed to have commenced on and from …… th day of
………………, 2019, i.e. the date of execution of this Partnership Deed.

NATURE OF BUSINESS

5. That the business of the firm shall be as under:

a. to carry on in India, either alone or jointly with one or another firm and/or body corporate in the
business of …………………………………………. etc.

b. to carry on in India, the business of ……………………………………………. etc.

c. to carry on any other business activity as may be mutually agreed upon between
 E-stamp Certificate No. ……………………

the parties from time to time.

CAPITAL

6. That the initial capital of the firm shall be Rs……………../- (Rupees

…………………….only), to be subscribed by the Parties in the following proportion:
First party ……….%
Second party ……….%,
and at a later date the Parties shall contribute the amount of capital in the Firm in the same
proportion.

DRAWINGS

7. That the parties shall make drawings as and when required for their personal need and shall be
debited to their respective accounts and shall be adjusted at the end of the financial year of
the firm.

BORROWINGS

8. That the firm may obtain such loan from Banks, Financial Institutions or any other parties or can
also take working capital limits from any Bank and other Financial Institutions upon such
terms as the parties may mutually agree from time to time.

SHARING OF PROFITS

9. That the profit and loss of the business of the Firm shall be ascertained after accounting of all
the business expenses on every 31st March and shall be divided and borne by the parties
in the following proportion :

Mr. ………………………… ………%

Mr. ………………………… ………%.
 E-stamp Certificate No. ……………………

The amount falling to the share of each partner, on the making of account, as aforesaid,
shall be credited or debited, as the case may be, to his personal account in the books of the
firm.

REMUNERATION TO PARTNERS

10. That the parties shall be working partners and will be entitled for the maximum remuneration
permissible under the provisions of Section 40 (b) of the Income Tax Act, 1961 in the
following manner :
1st Partner 2nd Partner
a) In respect of first Rs. 3, 00,000 ……….% ………%
of book profit : Rs.150000/- or
90% of Book Profit
(whichever is higher)
b) In respect of balance book profit : ……….% ………%
60% of book profit

(for the purpose of this clause “book-profit “means the net profit ,as show in the profit and
loss account for the relevant previous year computed in the manner laid down in the chapter
IV-d of the Income Tax ,1961as increased by the aggregate amount of the remuneration
paid or payable to both the partners of the firm if such amount has deducted while computing
the net profit)

INTEREST ON CAPITAL
11. That the parties will be entitled to interest on capital at the maximum permissible rate of 12%
per annum under the prevailing provisions of the Income Tax Act,1961 or such rate with the
mutual consent of the parties.

BOOKS OF ACCOUNT

12. That the firm shall regularly maintain books of accounts in the ordinary course of business to
show true and correct view of all incomes , expenditures and all its assets and liabilities and
 E-stamp Certificate No. ……………………

shall be maintained at the Head Office of the firm or at any other place as may be mutually
agreed upon by the Parties and shall remain open for inspection by any Party. The
accounting period of partnership business shall be a financial year i.e. from 1st day of April
to 31st March every year, a profit and loss account and balance sheet shall be drawn upon
as on 31st March every year.

BANK ACCOUNT

13. That the firm shall open bank account(s) with such bank (s) which shall be operated singly by
any one of the parties or in any other manner as may be mutually agreed upon between the
parties.

RETIREMENT OF PARTNERS

14. That the Partnership shall be AT WILL. However, any partner intending to retire from the firm
may do so by giving at least 30 days’ notice in writing to the other partner of his intention to
do so. In such an eventuality, the remaining Partner shall have sole and exclusive rights to
carry on the business of the Firm in the same name and style, upon such terms as may be
mutually agreed upon between the Parties including settlement of account of the retiring
Partner as per books of accounts of the Firm as on the date of retirement of the outgoing
Partner and thereafter, the retiring Party shall have no right to operate in the name and style
of the firm.

PRIVATE DEBTS

15. That the Firm shall not be liable for any civil and/or any criminal liabilities in respect of debts of
any partner taken in the individual capacity and the Parties will not create any liability against
the Firm for the personal benefits or gains and no partner shall use any assets of the Firm
for his personal advantage, other than those relating to the business of the firm.

INDEMNIFICATION
 E-stamp Certificate No. ……………………

16. That each partner shall be individually liable to repay the debts taken in individual capacity and
the Parties do hereby undertake to indemnify the Firm and the other party of all such costs,
expenses and losses including any attachment seizure or sale of any of the assets/property
(ies) of the Firm , as may arise in this regard.

DEATH OR INSOLVENCY

17. That it is specifically agreed that the death or insolvency of any of the parties to this deed shall
not result in the dissolution of the partnership firm in such an eventuality, the business of the
partnership shall be carried on as before, by the remaining partner along with legal heir of
such deceased or insolvent partner.

WINDING UP

18. That the Firm can be dissolved only with the mutual consent of the Parties upon such terms as
may be mutually agreed upon between the Parties and the winding up of the Firm shall be in
compliance to the provisions of the Indian Partnership Act 1932.

MISCELLANEOUS
19. That the Parties do hereby agree and undertake that during the tenure of this Partnership Deed,
none of the party shall enter and carry out any activities similar to the activities of the
business of the Firm , in his own name and/or in the name of any of his family
member/friends/ relatives or in partnership with any other person.

AMENDMENTS

20. That any alteration or amendment or modification of term of this Deed can be made in the Deed
by executing a Supplementary Partnership Deed.

BINDING EFFECT

21. That the parties do hereby undertake that they have read and understood all the terms of this
deed which shall be binding upon them during the tenure of this deed.
 E-stamp Certificate No. ……………………

ARBITRATION

22. That in case of dispute amongst the parties, the same shall be referred to arbitration, under the
provision of Indian Arbitration Act ,1940 ,or any enactment in force for the time being .

APPLICATION OF INDIAN PARTNERSHIP ACT

23. That anything not hereinafter specifically provided for shall be governed by the provisions of the
Indian Partnership Act, 1932.

THIS PARTNERSHIP DEED IS SIGNED BY THE PARTNERS IN THE PRESENCE OF THE

WITNESS ON THE DATE AND PLACE WRITTEN ABOVE.

WITNESSES: (……………………………..)
(FIRST PARTY)
1.

(…………………………..)
2. (SECOND PARTY)