4 things you should know before signing a partnership firm registration

Forging business partnerships is like a tight ropewalk. You have to consider a lot of factors before signing the final partnership agreement. Though business partnerships can help in monetary and intellectual gain, you must also delve on possibility of disagreements, ego or money leading to a fallout.

Hence, it is important to have a clear partnership firm registration that spells out every detail of different aspect of business operations.

Here are some essential tips to bear in mind when setting such a registration process in motion:

Choose your partner wisely

The success of a business partnership depends on the individuals working together towards a common goal. If a partner disagrees with long-term or short-term goals, it can be detrimental to the health of the business. Therefore, it is advisable to work with someone who has a similar thought process as yours and looks at things objectively.

Devil is in the details

For a partnership firm to work well in the long term, you need a well-drafted and balanced deed.

Here are some key points to focus on:

- Name of the partnership: It must be a unique name that should not bear any resemblance to an existing business, nor it can have words like an empire, emperor or crown in it. Use of such words in a business name requires prior government approval.

- Partners’ contribution and authority: The contribution of different partners in terms of cash, assets and services, and their subsequent valuation in ownership percentages has to be determined. Also, you must mention the authority of different partners in the decision-making process.

- Profit and loss: Details of how the profits will be divided and losses shared should be documented.

- Partner admittance or withdrawal: The process of adding a new partner to the business or withdrawal/removal of an existing partner should be well-thought.

- Resolution of disputes: You should also focus on a court order or ADR containing specifics about the approach toward resolution of disputes.

Capital distribution:

The partnership registration must include a deed specifying the capital contribution by each partner. This helps in avoiding disputes later, and should the need arise, makes dissolution easier. The capital distribution must include contribution in the form of cash, tangible assets such as land, premises, machinery or inventory, and intangible assets such as intellect, personal network of contacts, and goodwill.

Exit strategy:

The agreement must specify a clear exit plan for all partners involved, which must include:

- The procedure for partnership dissolution

- Details about the distribution of assets and capital

- Strategy for dissolution of the firm

Final thoughts

Partnerships are a great starting point for any business, but once the honeymoon period is over, a lot of unforeseen twists and turns can come about. Taking these key points into consideration while getting a partnership firm registration can help you glide through such rough patches without suffering setbacks.