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Partnership Firm

Indian Partnership Act, 1932 clearly states that there must be an agreement between the partners of a partnership firm by a contract, and the partnership agreement must comply with essentials of a valid contract, and the partners must be competent to contract and the object of partnership should not be forbidden. We at Wazzeer have received an ample number of questions on Counsel Application, where partners have shared some really critical issues faced by partners in their respective partnership firms, well I am going to add a snapshot of those conversations to the end of this blog. Coming to the essence of this blog, arm to help you Check if your Partnership Deed is Valid.


Partnership Deed may be oral but to avoid future disputes it is always advisable to have it in writing. Note, before the partnership is actually started Partnership Deed should be in place. Thus, the written document is a wise choice.


First and Foremost, the Partnership Deed must be properly drafted and stamped according to the provisions of the Indian Stamp Act. Each partner should be given a copy of the deed and if the firm is to be registered, a copy of the deed should be filed with the Registrar of Firms.


Entrepreneurs, in general, have little to no expertise to validate a contract (only document that would actually safeguard the dream venture and yourself). So, We at Wazzeer are providing you simple and easy tricks, just like correcting a 6th class going student test papers, you will now be able to validate the Partnership Agreement.


A typical partnership deed contains the following covenants, check if these are in place and order:


  1. The firm name and business to be carried on under that name.
  2. Names and addresses of partners.
  3. Nature and scope of business and address(s) of business place(s).
  4. Commencement and duration of the partnership.
  5. The capital and the contribution made by each partner.
  6. Provision for further capital and loans by partners to the firm.
  7. Partner’s drawings.
  8. Interest on capital, loans, drawings and current account.
  9. Salaries, commission, and remuneration to partners,
  10. Profit (or loss) sharing ratio of partners.
  11. The keeping of proper books of accounts, inspection, and audit, Bank Accounts, and their operation.
  12. The accounting period and the date on which that accounts are to be prepared.
  13. Rights, powers, and duties of the partners.
  14. Whether and in what circumstances, notice of retirement or dissolution can be given by a partner.
  15. Provision that death or retirement of a partner will not bring about dissolution of partnership,
  16. Valuation of goodwill on retirement, death, dissolution etc.
  17. The method of valuation of assets (and liabilities) on retirement or death of any partner.
  18. Provision for the expulsion of a partner.
  19. Provision regarding the allocation of business activities to be performed by individual partners
  20. The arbitration clause for the settlement of disputes. The terms contained in the partnership deed may be varied with the consent of all the parties, and such consent may be express or implied by a course of dealing. [Section 11(1)]



Actual queries regarding Partnership firm, Partnership Deed, and disputes between partners:

How to Check if your Partnership Deed is Valid?

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Business Formation, Partnership Firm

This article will talk about the Top 10 Features that Partners of Partnership Firm should know:

  1. Two or more Members – At least two members are required to start a partnership business. But the number of members should not exceed 10 in case of banking business and 20 in case of other business. If the number of members exceeds this maximum limit then that business cannot be termed as partnership business.

 

  1. Agreement: Partnership Agreement is what that will constitute each partner’s role towards running the partnership firm. This agreement contains:

 

  • the amount of capital contributed by each partner;
  • profit or loss sharing ratio; o salary or commission payable to the partner, if any; o duration of business, if any ; o name and address of the partners and the firm; o duties and powers of each partner; o nature and place of business; and o any other terms and conditions to run the business.

 

  1. Competence of Partners – Since individuals join hands to become the partners, it is necessary that they must be competent to enter into a partnership contract. Thus, minors, lunatics, and insolvent persons are not eligible to become the partners. However, a minor can be admitted to the benefits of partnership i.e., he can have a share in the profits only.

 

  1. Sharing of Profit – The main objective of every partnership firm is sharing of profits of the business amongst the partners in the agreed proportion. In the absence of any agreement for the profit sharing, it should be shared equally among the partners. Suppose, there are two partners in the business and they earn a profit of Rs. 20,000. They may share the profits equally i.e., Rs. 10,000 each or in any other agreed proportion, say one forth and three fourth i.e. Rs 5,000/- and Rs. 15000/-.

 

 

  1. Unlimited Liability – Just like the sole proprietor the liability of partners is also unlimited. That means if the assets of the firm are insufficient to meet the liabilities, the personal properties of the partners, if any, can also be utilized to meet the business liabilities. Suppose, the firm has to make payment of Rs. 25,000/- to the suppliers of goods. The partners are able to arrange only Rs. 19,000/- from the business. The balance amount of Rs. 6,000/- will have to be arranged from the personal properties of the partners.

 

  1. Voluntary Registration – It is not compulsory that you register your partnership firm. However, if you don’t get your firm registered, you will be deprived of certain benefits, therefore it is desirable. The effects of non-registration are:

 

  • Your firm cannot take any action in a court of law against any other parties for settlement of claims.
  • In case there is any dispute among partners, it is not possible to settle the disputes through a court of law.
  • Your firm cannot claim adjustments for the amount payable to or receivable from any other parties.

 

  1. No Separate Legal Existence – Just like a sole proprietorship, partnership firm also has no separate legal existence from that of it owners. Partnership firm is just a name for the business as a whole. The firm means the partners and the partners collectively mean the firm.

 

  1. Principal Agent Relationship – All the partners of the firm are the joint owners of the business. They all have an equal right to actively participate in its management. Every partner has a right to act on behalf of the firm. When a partner deals with other parties in business transactions, he/she acts as an agent of the others and at the same time the others become the principal. So there always exists a principal agent relationship in every partnership firm.

 

  1. Restriction on Transfer of Interest – No partner can sell or transfer his interest to anyone without the consent of other partners. For example – A, B, and C are three partners. A wants to sell his share to D as his health does not permit him to work any more. He can not do so until B and C both agree.

 

  1. Continuity of Business – A partnership firm comes to an end in the event of death, lunacy or bankruptcy of any partner. Even otherwise, it can discontinue its business at the will of the partners. At any time, they may take a decision to end their relationship.

 

Wazzeer is vouched by Entrepreneurs as the most reliable Legal and Accounting Partner. We would be super excited to help you. Let’s Connect! 🙂

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Business Registration, LLP, Partnership Firm, Start up Lessons, Trademark
Every business entity needs to be given some name and the functioning of the business is carried out in that name only. In the case of a company which enjoys the status of the separate legal entity, choosing business name in India is a must. Name approval from the Registrar of Companies is pre-requisite condition before incorporation of the company.

Procedure for Business Name approval in India

Application to concerned Registrar of Companies to ascertain the availability of name in eForm-INC1 need to be made. Maximum 6 suitable business or company names can be submitted in order of preference and name must indicate main objects of the company.

While choosing business name in India, make note of following:

  • The proposed business names must not be similar or resemble the name of any other already registered company, or
  • Proposed business name should not violate the provisions of emblems and names (Prevention of Improper Use Act, 1950), or
  • Proposed business or company name(s) should not constitute an offense under any law.
  • Last word Limited need to be used in the case of a public limited Company, or Private Limited, in the case of a private limited Company and LLP needs to be used for Limited liability Partnerships.
Along with government fee and complete form, the digital signature of the applicant proposing the company needs to be attached. For filling this form Digital Signature of one of the Promoters is mandatory.

The details need to be provided in eForm INC1 are:-
  • Authorized capital for the proposed company
  • Main objectives of the proposed company
  • State (location) of the proposed company
  • Personal details of all Promoter?s
  • Copy of trademark application/certificate (if applicable)
  • In case, there is a logo associated with trademark then image of logo
  • Balance sheet (if applicable) and Income tax returns for last 2 years

If the name is approved by Registrar of Companies, letter of acceptance is issued for the proposed name. If proposed name(s) are not available, fresh names can be applied through the same application.


We will be glad to help you in choosing a business name, let’s connect.

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