Partnership Deed

Before you sign a partnership deed

• A partnership under the Indian Partnership Act, 1932 needs at least two persons who agree to share profits of a business carried on by all or any of them acting for all.
• A partnership firm can have up to 50 partners under the current company law rules. Beyond that, the business must be registered as a company or another structure.
• A minor cannot be a full partner but can be admitted to the benefits of an existing partnership with the consent of all partners.
• An unregistered firm cannot file a court case against a third party to enforce a contract, and a partner of an unregistered firm cannot sue the firm or other partners to enforce rights under the deed. This is the main reason to register.
• If the deed does not fix a duration, the partnership is a partnership at will and any partner can end it by giving notice to the others.
• Partners in a general partnership have unlimited personal liability for the firm's debts. If you need limited liability, a limited liability partnership (LLP) may be more suitable.

What affects the total cost

• Stamp duty on the partnership deed, which in most states depends on the total capital contributed.
• Fee for registering the firm with the Registrar of Firms, if you choose registration.
• Notary charges for attesting the deed.
• Cost of supporting documents, such as a rent agreement or no-objection letter for the business premises.
• Follow-up work like PAN for the firm, a current bank account, GST registration and Udyam registration (Udyam itself is free on the government portal).

How long it takes

Collecting the terms is usually the slowest part, because partners need to agree on capital, profit ratio, salaries, decision making and what happens when someone leaves. Once the terms are settled, the draft is ready in a day or two and can be signed on e-stamp paper and notarised. Registration with the Registrar of Firms takes extra time because the application, deed and partner details are checked by the office. Delays usually come from disagreement between partners or from missing proof of the business address.

Common mistakes to avoid

• Copying a generic deed from the internet without clauses on exit, death of a partner, admission of a new partner or settlement of accounts.
• Not mentioning the firm's actual business activities, which later causes problems with bank accounts and GST registration.
• Leaving out salary and interest on capital clauses, or writing figures that do not match income tax limits, so the firm loses the deduction.
• Not registering the firm and later finding that it cannot sue a customer or vendor to recover dues.
• Not updating the deed when a partner retires or joins, which leaves the old partner liable to third parties.

What you get at the end

You receive the signed and notarised partnership deed on stamp paper, and a registration certificate if the firm is registered. The deed is used to apply for the firm's PAN, open a current account in the firm's name, apply for GST registration where turnover crosses the threshold or the business requires it, and register on the Udyam portal. Keep the original safe, as banks and tax officers often ask to see it.

In Delhi NCR

• In Delhi, stamp duty on the partnership deed is paid through e-stamp, and the amount depends on the capital as per the Delhi stamp schedule.
• Firm registration in Delhi is handled by the Registrar of Firms of the Delhi government. The application needs the deed, partners' details and proof of the principal place of business.
• Firms based in Gurugram or Faridabad register with the Haryana Registrar of Firms, and firms in Noida or Ghaziabad with the Uttar Pradesh registrar, each with its own forms and fees.
• If the business runs from rented premises in Delhi, a rent agreement or owner's consent letter is usually needed for GST and bank account opening.
• Outside Delhi NCR, the team can prepare the deed online and guide you on your state's stamp and registration process where possible.