Each and every one of the relationships between the partners in a partnership business must be reconstructed, no matter how little the change may be. In other words, a partnership business must be recreated whenever a new member joins or an old member leaves. This means that any changes to the partnership, including the inclusion of new partners, must have unanimous approval from every partner already on board. If you wish to add new partner to a partnership firm this article is for you. In this article, you will get to know about the Procedure to Add new partner in Partnership Firm.
How to add new partner in partnership firm?
A new partner can be admitted to a partnership under the Indian Partnership Act, 1932 if all of the current partners agree to the execution of a new Partnership Deed.
In other words, you need to create a new partnership deed with all the other partners present in your firm agreeing to it.
The presence of all of the current partners, as well as the new partner and witnesses, is required at the moment of signing the new partnership deed.
All partners must have an original copy of their PAN Card and evidence of residency with them at all times.
New Partner’s Legal Responsibilities in Partnership Firm
Liabilities of newly admitted partners begin on the day of their admission as partners unless they agree to be accountable for commitments that the business has already contracted before that date. This is not always how partnership firms operate, however. If the new business agrees to assume responsibility for the firm’s previous obligations, creditors may accept the new company as their debtor and release the former partners. Thus, It is always required for the creditor’s approval before a deal can proceed. However, the phrase for substituting responsibility, known as “novation,” is not limited to the context of a partnership.
However, It is not possible to use a simple agreement between the partners as Novation. As a result, even if a partnership agreement states that the new partner would be responsible for the firm’s current debtors, creditors will not be able to sue him.
In the event of a two-person partnership, this section does not apply since, if one of the partners dies, the partnership is instantly dissolved. As a result, no new partners may be brought into the partnership formation without the approval of the other partners’ previous partners.
What are the advantages of Partnership Formation?
There are several types of company formation and online company registration. Each of these offers unique advantages. The benefits of partnership firm registration are as follows:
- Comparatively speaking, forming a partnership firm is far simpler than forming any other type of business entity. This may be done by writing the Partnership Deed and signing a Partnership Agreement.
- Partnership firms are subject to far fewer regulations than corporations or limited liability companies.
- Decisions in a partnership business are made quickly since there is no distinction between management and owners.
- The partners participate equally in the firm’s Profits and losses. It’s up to them to decide how much money they make and lose in the partnership company.
As long as the deed of partnership isn’t filed with the government, they won’t be eligible for the advantages that come with being a legally recognized partnership. Hence, partnership firm registration is essential.
What is a Partnership Deed?
The Partnership Deed is the legal instrument that outlines the rights and responsibilities of the partnership’s members.
When it comes to a partnership deed, it might be written or orally stated. However, a well-documented or properly written partnership agreement is required for taxation purposes, thus an oral agreement is of little use.
Moreover, If you want any other guidance relating to Partnership Firm Registration, please feel free to talk to our business advisors at 8881-069-069.
Download E-Startup Mobile App and Never miss the latest updates narrating to your business.