Partnership is a legally binding contract between two or more persons for doing business. In Pakistan the contract must be in written which is called “partnership deed”, which state the Name of firm, place of business , number of partners, date of commencement , duration of partnership whether it is at will or for a specific period of time.
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- Firstly It is not a separate legal person, all partners are personally and jointly responsible for any loss or liabilities of the firm there liability is unlimited.
- Secondly A firm can be dissolved on the death or retirement of partner.
- And lastly no partner can transfer its own ownership to another without the permission or approval from other partners .
No, Registration is not mandatory by law. It is optional. However following are additional benefits which registered firms can avail.
Only partnerships deed not legally enforceable. In case of dispute arises among the partners then a suit can be filed for enforcement of any legal any right arising from any contract. On the other hand un-registered firms has not empowered to file any suit against a third party for enforcement of any right.
In most cases firm registration certificate is required to enter into any Commercial and government Contracts. Furthermore it is also required for the Opening of Bank Account/ chamber of commence membership /businesses visas. Hence it is not only required for documentation but also provide identity to the organization.
The firms shall be register with registrar of firms in the district where principal place of business is located for example if business address is in Lahore then firm shall be register in Lahore. Although the Partnership Act 1932 is same all over Pakistan but the procedures for registration is slightly modified by the concerned province.
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Application for Registration
The application shall contains the following information about the firm:
- Principal place of business
- Date of joining of all partners
- Names and permanent addresses of the all partners
- Duration of the firm (Fixed or for particular period)
Al-Muhasib & Co. provides services including the drafting of partnership deed and preparation of all necessary documents. Furthermore we are also available for hearing or reply to any objection raised by department concerned.
Number of Partners
In this form of business, minimum 2 and maximum numbers of partners depends on type of business such as:
- Banking business maximum number is 10.
- In case of any other business maximum number is 20.
- Professional persons(such as chartered accountants or lawyers maximum number may exceed 20.)
Dissolution or Winding Up of Firm
The partnership is dissolved automatically on happing of following events.
Fixed Term: If the agreement between the partners is for specific period of time, then it will be automatically ended on the date of expiration which have mentioned in the contract.
Death of partner: In that case the agreement between the partners shall also be dissolved.
Insolvent Partner: In the event that partner become bankrupt and unable to pay its debts then in such situation agreement between partners come to an end.
At-Will:If the contract is at “Will” then it can be Dissolve by any partner giving notice in writing to all the other partners.
Dissolution by the Court: A suit can be file in court to dissolve the partnership on the following grounds.
- • If the partner(s) become unable to perform his duties as partner. For instance due to serious health issue.
- • The concern partner commits breach of terms of contractual agreement.
- • Transfers of shares to third party without the consent of others partners.
The contents of the PARTNERSHIP DEED is reproduced here which can be modified.
- This deed of partnership is made and executed at Lahore on the 14th day of July-2020, by and between the following two parties:-
- MR. xxxxxxxxxxxxxxxxx
- (Hereinafter called parties of the 1st & 2nd part respectively).
- The term parties of all parts shall mean and include their legal heirs, executors, administrations and assigns.
- WHEREAS the parties above named are agreed to become partners with effect From 14/07/2020 by entering into the partnership firm under the name and style of “M/S ABC TRADERS ” with its head office at XXXXXXXXXXXXXXXXXXXX Lahore and branches may be opened anywhere in Pakistan. Now it has been desired to record the terms and conditions of above mentioned partnership business in writing to eliminate the ambiguity later on.
- The following terms and conditions have been settled mutually:-
- That the business of the firm shall include the business of Import and Export, General Order Supplier or relating all businesses or any other lawful business allied to it.
- That the capital investment of the partnership business shall be recorded in the books of accounts to be maintained by the firm.
- That the net profit and loss of the firm shall be shared/distributed according to the following ratio of each partner.
- Mr. XXXXXXXXXXXX 90%
- Mrs. XXXXXXXXXXXX 10%
- That MR.XXXXXXXXXXXXXX will manage and conduct all the affairs of the partnership business diligently.
- That the bank account shall be opened in the name of the firm which will be operated by MR.XXXXXXXXXXXXXX during the period.
- That the duration of the firm shall be AT WILL.
- That the accounts of the firm shall be closed on 30th June of every year.
- That each partner shall be responsible to discharge all liabilities including payment of income tax according to his share and no change in the constitution of the firm shall be made without consent of the managing partner MR.XXXXXXXXXXXXXX
- That in the event of death of any partner, the legal heirs or representative of the deceased will be taken as a partner on the same terms and conditions but with the consent of the surviving partner.
- That the partnership deed will be registered from registrar of Firm.
- That in case of any dispute, differences, touching the affairs of the partnership business, the matter will be referred to arbitration with the consent of the partner Imran Hanif to resolve the dispute. The award of the Arbitration shall be conclusive and binding upon the partners.
- That each partner is bound to carry on the business of the partnership to the greater advantage of the partnership firm and attend the business diligently.
- That in case of arising any dispute related to business between the partners of the firm the bank account will be managed by partner MR.XXXXXXXXXXXXXX
- IN WITNESS WHEREOF, the above said partners have signed the instrument on the aforesaid date with their free will after sane and are of sound minds.