Partnership Deed Registration in India – Format, Process & Legal Requirements 2025

Starting business with partner(s)? Partnership deed is essential!

Without proper partnership agreement, disputes are inevitable. Partners fight over profit sharing, responsibilities, and decision-making. A well-drafted partnership deed prevents 90% of partnership conflicts.

Let's understand everything about partnership deeds and registration.

What is Partnership?

Partnership = Business arrangement where 2 or more persons agree to share profits/losses of a business.

Governed by: Indian Partnership Act, 1932

Characteristics:

• Minimum 2 partners (maximum 50)

• Agreement to share profits

• Business run by all or any of them

• Mutual agency (each partner represents partnership)

• Unlimited liability (partners personally liable)

Example: Rahul and Priya start a cafe together, invest equally, share profits 50-50 = Partnership

What is Partnership Deed?

Partnership deed = Written agreement between partners containing terms and conditions of partnership.

Also called:

• Partnership agreement

• Articles of partnership

Legal status:

• Not mandatory by law (oral partnership valid)

• But strongly recommended – Prevents disputes

Without deed: Partnership Act's default rules apply (may not suit your arrangement)

Why Partnership Deed is Important:

✓ Clarity – All terms in writing, no confusion✓ Legal proof – Evidence of agreement✓ Dispute prevention – Clear rules avoid conflicts✓ Profit sharing – Documented formula✓ Decision rights – Who decides what✓ Admission/exit – Process for new/leaving partners✓ Banking – Banks require deed for partnership account✓ Loans – Financial institutions need deed✓ Registration – Required for deed registration✓ Tax filing – Needed for partnership ITR

Partnership Deed Registration – Mandatory or Optional?

Registration is OPTIONAL under Partnership Act.

Unregistered partnership:

• Valid and legal

• Can operate business

• Partners bound by deed

But cannot:

• Sue third parties in civil court

• Enforce rights against third parties

• Partners can't sue each other in court

Registered partnership:

• Can sue third parties

• Better legal standing

• Partners can enforce rights in court

• More credibility

Recommendation: ALWAYS register!

Benefits far outweigh the small cost.

Essential Clauses in Partnership Deed:

1. Name of Partnership Firm

• Business name

• Should not be identical to existing firm

• Should not violate trademark laws

Example: "Sharma & Associates"

2. Nature of Business

• What business you'll conduct

• Products/services offered

• Can be broad or specific

Example: "Trading in electronics and mobile accessories"

3. Principal Place of Business

• Registered office address

• Where business will operate

• Can have multiple branches (mention all)

4. Names and Addresses of Partners

• Full legal names

• Residential addresses

• Contact details

• Father's name

• Nationality

5. Date of Commencement

• When partnership starts

• Important for accounting and tax

6. Duration of Partnership

• At will (indefinite)

• Fixed period (e.g., 5 years)

• For particular venture (e.g., one project)

Most common: "Partnership at will" (continues until dissolved)

7. Capital Contribution

• How much each partner invests

• Mode (cash/assets/goodwill)

• When to be paid

• Interest on capital (if any)

Example:

• Partner A: ₹5 lakh (cash)

• Partner B: ₹3 lakh (cash) + ₹2 lakh (equipment)

8. Profit and Loss Sharing Ratio

• How profits/losses divided

• Can be equal or unequal

• Can be different from capital ratio

Example:

• Equal investment but 60:40 profit sharing (one partner more active)

9. Partner Rights and Duties

• Each partner's role

• Decision-making authority

• Signing authority

• Who can withdraw cash

• Attendance requirements

Example:

• Partner A: Sales and marketing

• Partner B: Operations and finance

10. Salary/Remuneration to Partners

• Fixed salary (if any)

• Over and above profit share

• Common when one partner works full-time

Example: "Partner A shall receive monthly salary of ₹50,000 in addition to profit share"

11. Interest on Capital

• Interest paid on capital contributed

• Rate (e.g., 10% p.a.)

• Paid before profit distribution

Example: "6% p.a. simple interest on capital"

12. Interest on Drawings

• If partner withdraws money

• Interest charged

• Reduces their profit share

Example: "12% p.a. on amounts withdrawn"

13. Banking and Accounts

• Which bank for partnership account

• Signing authority

• Financial year (April-March typically)

• Accounting method

14. Admission of New Partner

• Process to add new partner

• Consent required (all/majority)

• Terms for new partner

Example: "New partner admitted only with unanimous consent"

15. Retirement of Partner

• Notice period (e.g., 3 months)

• Settlement of accounts

• Valuation of partner's share

16. Death of Partner

• Settlement with legal heirs

• Continuation or dissolution

• Valuation method

17. Dissolution of Partnership

• Conditions for dissolution

• Notice period

• Asset distribution

• Liability settlement

18. Dispute Resolution

• Arbitration clause

• Mediation first

• Jurisdiction (which court)

Example: "Disputes resolved by arbitration in [City] as per Arbitration Act"

19. Non-Compete Clause

• Restriction on partners

• Can't start competing business

• During and after partnership

Example: "Partners shall not engage in similar business within same city for 2 years after exit"

20. Miscellaneous

• Amendment procedure

• Partner's drawings limit

• Leave/vacation policy

• Insurance

• Any other terms

Sample Partnership Deed Format:

PARTNERSHIP DEED

This Partnership Deed is executed at [City] on this [Date] day of [Month], [Year]

BETWEEN:

1. [Partner 1 Name], S/o [Father's Name], residing at [Address], PAN: [PAN], Aadhaar: [Aadhaar] (hereinafter referred to as "First Party/Partner")

AND

2. [Partner 2 Name], S/o [Father's Name], residing at [Address], PAN: [PAN], Aadhaar: [Aadhaar] (hereinafter referred to as "Second Party/Partner")

(Collectively referred to as "Partners")

WHEREAS the parties hereto have agreed to enter into partnership for carrying on the business of [Nature of Business] on the terms and conditions hereinafter mentioned.

NOW THIS DEED WITNESSETH AS FOLLOWS:

1. NAME OF FIRM
The firm shall be called "[Firm Name]"

2. NATURE OF BUSINESS
The partnership shall carry on the business of [detailed description]

3. PLACE OF BUSINESS
The principal place of business shall be at [Full Address]

4. COMMENCEMENT
The partnership shall commence from [Date]

5. DURATION
The partnership shall continue until dissolved by mutual consent or as per terms herein.

6. CAPITAL
The capital of the partnership shall be ₹[Amount] contributed as follows:
- Partner 1: ₹[Amount]
- Partner 2: ₹[Amount]
Total: ₹[Amount]

7. PROFIT & LOSS SHARING
Profits and losses shall be shared in the following ratio:
- Partner 1: [%]
- Partner 2: [%]

8. INTEREST ON CAPITAL
Interest on capital shall be paid @ [%] per annum.

9. DRAWINGS
Partners may draw amounts for personal use. Interest on drawings shall be charged @ [%] per annum.

10. PARTNER DUTIES
Partner 1 shall: [Responsibilities]
Partner 2 shall: [Responsibilities]

11. BANKING
The firm shall maintain account with [Bank Name]. Cheques/transactions above ₹[Amount] shall require signatures of both partners.

12. ACCOUNTS
Books of accounts shall be maintained. Financial year: April to March. Accounts audited annually.

13. ADMISSION OF NEW PARTNER
New partner can be admitted only with written consent of all existing partners.

14. RETIREMENT
Any partner may retire by giving [X] months written notice. Accounts settled as per valuation.

15. DEATH OF PARTNER
In case of death of any partner, legal heirs entitled to [settlement terms]. Partnership may continue with remaining partners.

16. DISSOLUTION
Partnership may be dissolved by mutual written consent or upon happening of events mentioned in Partnership Act.

17. ARBITRATION
Any dispute shall be referred to arbitration as per Arbitration and Conciliation Act, 1996. Arbitration seat: [City].

18. JURISDICTION
Courts at [City] shall have exclusive jurisdiction.

IN WITNESS WHEREOF the parties have set their hands on the day and year first above written.

SIGNED AND DELIVERED BY:

[Partner 1 Name]                          [Partner 2 Name]
(First Party)                             (Second Party)

WITNESSES:

1. [Name, Address, Signature]

2. [Name, Address, Signature]

Partnership Deed Registration Process:

Step 1: Draft Partnership Deed

Options:

A) Hire lawyer (₹3,000-15,000)

• Professional drafting

• Customized to your business

• Legal advice

B) Use online platforms (₹2,000-8,000)

• LegalDesk, VakilSearch, etc.

• Template-based

• Quick and cheap

C) DIY (Free, but risky)

• Use format above

• Customize yourself

• Risk of missing important clauses

Recommendation: At least consult lawyer once

Step 2: Print on Stamp Paper

Stamp duty varies by state:

Common rates:

• Maharashtra: ₹100-500

• Delhi: ₹100-200

• Karnataka: ₹100-300

• Tamil Nadu: ₹100

• Uttar Pradesh: ₹100-200

Check your state's stamp duty for partnership deed.

Purchase stamp paper:

• From authorized vendor

• Of required denomination

• Non-judicial stamp paper

Print deed on stamp paper or write/type and paste.

Step 3: Execute the Deed

All partners sign:

• In presence of 2 witnesses

• Witnesses also sign

• Mention date

No notarization required (but can do for extra authentication)

Step 4: Apply for Registration

Where to register:

• Office of Registrar of Firms in your state

• Usually under Commercial Taxes/Revenue Department

How to find: Check: [State] Registrar of Firms office

Examples:

• Maharashtra: https://maharegistration.gov.in

• Karnataka: Commercial Taxes Department

• Delhi: Department of Trade and Taxes

Step 5: Submit Documents

Documents required:

✓ Partnership deed (original + 2-3 copies)✓ Application for registration (Form 1)✓ Affidavit (from all partners)✓ Identity proof of all partners (PAN mandatory, Aadhaar, passport)✓ Address proof of partners✓ Address proof of firm (rent agreement/ownership documents)✓ Passport size photos of all partners✓ Registration fee payment

Form 1 (Application for Registration) contains:

• Firm name

• Principal place of business

• Other places (if any)

• Partners' names and addresses

• Date of joining of each partner

• Duration of firm

Step 6: Pay Registration Fees

Fees vary by state and capital:

Typical structure:

• Up to ₹50,000 capital: ₹200-500

• ₹50,000-5 lakh: ₹500-2,000

• Above ₹5 lakh: ₹2,000-10,000

Check state-specific fees.

Step 7: Verification

Registrar:

• Verifies documents

• Checks deed compliance

• May ask for clarifications

• Approves if everything correct

Step 8: Get Certificate of Registration

If approved:

• Firm registered

• Certificate of Registration issued

• Contains Registration Number

• Valid permanently (unless dissolved)

Timeline: 7-30 days (varies by state)

After Registration:

Use registration certificate for:

✓ Opening bank account✓ Applying for loans✓ GST registration✓ Other licenses✓ Proof of firm existence✓ Legal proceedings

Online Registration (Some States):

States with online registration:

• Maharashtra

• Karnataka

• Tamil Nadu

• Gujarat

Process:

• Visit state's registration portal

• Fill online form

• Upload documents

• Pay fees online

• Track application

• Download certificate

Faster and more convenient!

Partnership Firm PAN:

Separate PAN needed for firm:

Apply at:

• NSDL/UTIITSL

• Online or offline

Documents:

• Partnership deed

• Registration certificate

• Partners' PAN

• Address proof

Mandatory for:

• Income tax filing

• Bank account

• GST registration

Partnership vs LLP vs Pvt Ltd:

Feature	Partnership	LLP	Private Limited
Partners/Members	2-50	2+ (no max)	2-200
Liability	Unlimited	Limited	Limited
Registration	Optional	Mandatory	Mandatory
Compliance	Low	Medium	High
Cost	Low	Medium	High
Taxation	At individual level	At LLP + individual	Corporate + individual
Best for	Small businesses	Professional firms	Startups, scale-ups

Common Mistakes to Avoid:

❌ Oral partnership – Always have written deed❌ Vague profit sharing – Be specific (60:40, not "as decided")❌ No exit clause – Define retirement/exit process❌ Missing arbitration – Include dispute resolution❌ Incomplete address – Full address with pin code❌ No non-compete – Partner can start competing business❌ Unclear authority – Who can sign what❌ Not registering – Lose legal benefits❌ One partner drafts alone – Both should agree to every clause

Amendment of Partnership Deed:

If you need to change terms:

Process:

1. Draft supplementary deed (amendment)

2. All partners sign

3. On stamp paper

4. File with Registrar (if registered firm)

5. Update all authorities (bank, tax, etc.)

Common amendments:

• Adding/removing partner

• Changing profit ratio

• Changing firm name

• Changing business nature

Dissolution of Partnership:

When partnership ends:

Process:

1. Partners agree to dissolve (or events per deed)

2. Draft dissolution deed

3. Settle accounts

4. Pay liabilities

5. Distribute assets

6. File notice with Registrar (Form 9)

7. Close bank accounts

8. Cancel registrations (GST, etc.)

Reasons for dissolution:

• Mutual agreement

• Death of partner (if not continuing)

• Insolvency of partner

• Business becomes illegal

• Fixed period expired

• Court order

Real Examples:

Case 1: Rajiv and Suresh started mobile shop. Invested ₹2 lakh each. Verbal partnership. After 1 year, dispute over profit split. No proof of agreement. Costly court battle. Lesson: Always have written deed.

Case 2: Priya and Meera, CA firm. Drafted detailed partnership deed with lawyer (₹8,000). Registered (₹500 fees). One partner wanted to exit after 3 years. Exit clause was clear: 6 months notice, settlement as per valuation. Smooth exit, no disputes. Lesson: Good deed prevents problems.

Case 3: Three partners, construction business. Deed specified "major decisions require 2 out of 3 votes." One partner wanted to take big loan, other two refused. Clear clause prevented dispute. Lesson: Decision-making rules important.

Tips for Successful Partnership:

✓ Choose partner carefully – Trust is everything✓ Draft detailed deed – Cover all scenarios✓ Register the firm – Legal protection✓ Define roles clearly – Avoid overlap and gaps✓ Review annually – Update deed if needed✓ Communicate openly – Discuss issues early✓ Keep finances separate – Personal and business accounts✓ Document everything – All major decisions in writing✓ Respect the deed – Follow what you signed✓ Consider LLP – If you want limited liability

Conclusion:

Partnership deed is the foundation of a successful partnership. A well-drafted, registered deed:

• Prevents 90% of disputes

• Provides legal protection

• Clarifies rights and duties

• Enables growth

Don't start partnership without deed. Spend ₹5,000-15,000 now, save lakhs in disputes later!

Starting business with partner? Get partnership deed drafted and registered today!