A Partnership is defined by the Indian Partnership Act, 1932, as ‘the relation between persons who have agreed to share profits of the business carried on by all or any of them acting for all’. Agreement is the essential part of partnership business. It secure the right of both party. A partnership agreement should be prepared when you start a partnership.
An legal professional should help you with the partnership agreement, to make sure you include all-important clauses and avoid problems when the partnership ends.
1.Percentages of ownership and distribution of profits and losses
2.Description of management powers and duties of each partner
3.Term (length) of the partnership
4.How the partnership can be terminated
5.How a partner can buy his/her share of the partnership.
Features of Partnership Agreement:
1.Roles and Responsibilities:To set up the roles and responsibilities of each partner and to describe how decisions are made. This decides the question regarding managing partner, responsibilities of individually named partners, any change in roles and responsibility.
2.Taxation:To avoid tax issues, by having the tax status of the partnership, and to show that the partnership is distributing profits based on acceptable tax and accounting practices.
3.Liability:To avoid legal and liabilities, stating out the liability of individual partners and the liability of all partners if there is a liability issue with one partner.
4.Buy- out: The partnership agreement deals with any future changes in the partnership due to life challenges of existing partners - partners who leave, become ill or incompetent, get divorced, or die. These are usually dealt with in buy- out agreement with each partner.
5. New Partner:The partnership agreement deals with the circumstances under which new partners can enter the partnership.
6.Conflict of Interest:To deal with partner issues, like a conflict of interest and non-compete agreements.
7.To override state laws: Some states have fixed language in partnership agreements. If you don't have a formal written agreement, you may find yourself having to abide by the default state laws.
8.Dispute:To make disputes easier. It's a good idea to include language in your partnership agreement that describes how disputes will be handled. It also deals with possibility of arbitration, responsibilities of parties and who will bear the costs relating to such disputes.
9.Authority: Partner authority, also known as binding power, should also be defined within the agreement. Binding the business to a debt or other contractual agreement can expose the company to an unmanageable level of risk.
Passport photo of all parties.
PAN card of all parties.
Aadhar card of all parties.
Utility bill of Electricity or Telephone.
Valid Address Proof of all the parties.
Valid Driving Licence of all the parties.
Terms and Conditions between the parties.
Other documents will be intimated through e-mail.
Although each partnership agreement differs based on business objectives, certain terms should be detailed in the document, including percentage of ownership, division of profit and loss, length of the partnership, decision making and resolving disputes, partner authority, and withdrawal or death of a partner.
The purpose of a partnership agreement is to protect the owner's investment in the company, govern how the company will be managed, clearly define the rights and obligations of the partners, and determine the rules of engagement should a disagreement arise among the parties
Partnerships require minimal paperwork and bureaucracy, and they rarely require public filings. If you are looking to start your own partnership, a partnership lawyer can help you draft the best possible partnership agreement for your needs.
A partnership agreement is a contract between partners in a partnership which sets out the terms and conditions of the relationship between the partners, including: Percentages of ownership and distribution of profits and losses. Description of management powers and duties of each partner.
Partnership agreements are written documents that explicitly detail the relationship between the business partners and their individual obligations and contributions to the partnership.
You don't have to file any paperwork to establish a partnership. A partnership is simply created by agreeing to go into business with another person.