Mr.A is very simple man and he trust people very easily. He had rs.10 lacs and wanted to invest it in business. In his building Mr.B was staying for 4 years on rental basis. There used to be formal hi hello and they became friends.
Mr. A told Mr. B about his plans. Mr. B advised him to start garments business. Mr. A immediately agreed. Mr. A paid deposit of shop rs.100000 from his a/c. then Mr. B asked mr A that he also want to get involved in this business. Mr.A told him to take him as partner with 25% share but Mr. B asked for 50% share and mr. A agreed. Mr. B told that he wont bring a single penny.
I have prepared the partnership deed and showed that capital as rs.1 lacs entirely contributed by Mr.A.
within 3 months Mr.A has incurred rs.11 lacs including shop deposit for the business.
Mr. A came to me and told me that he think that he has taken the wrong decision and he may close the partnership in november/december. Mr. B is unaware about all this. He is worrying that on dissolution Mr. B might ask his share of from the assets(furniture/cloths/deposits/ac/pc etc) of the firm since most of the payments were made in cash.
He told me to prepare a documents in which Mr. B will sign that entire assets of the firm belongs to Mr. A and He does not have any right to it except share of profit.
I need the opinion of experts regarding how to preapre the same and what are the formalities required ?
07 June 2012
You can do so by preparing an amendment deed communicating to Mr B that it is for Income Tax purposes to authorize Partner's Remuneration and Interest on Capital. While drafting ensure that you mention at least at more than one place that
the capital of the business is solely brought in by Mr A and Mr B had not made any contribution
that Mr B is only a working partner eligible for remuneration and profit;
that all fixed assets belong to Mr A as he had brought in the Capital and that Mr A and Mr B are the owner of the WC(Current Asset less Current Liabilities) only
Mention that the Partners cannot draw beyond their Capital outstanding in the firm thereby preventing Mr B from asking for more than his share of Capital
CAclubindia
