Partnership dissolution and new partnership created

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Ahmedraza (Querist)
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02 January 2014 Hello,

There is partnership Firm with 3 Partners. One of them retired.
Remaining 2 partner along with one other person started a new firm. Will it require separate stamp paper for dissolution of old firm or the description for dissolution be enough in new partnership deed?

Ahmedraza

Ahmedraza (Querist)
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06 January 2014 Hello All,

Any reply for this.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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09 August 2024 When dealing with the dissolution of an old partnership firm and the formation of a new one, it's important to follow legal procedures to ensure that everything is done correctly. Here’s a breakdown of what needs to be done:

### **1. Dissolution of the Old Partnership Firm**

**Documentation Required:**
1. **Dissolution Deed:** A formal dissolution deed should be prepared and executed by all the remaining partners of the old firm and the retiring partner. This document should outline the terms of the dissolution, including the settlement of accounts, distribution of assets and liabilities, and the effective date of dissolution.

2. **Stamp Paper:** It is typically advisable to execute the dissolution deed on a stamp paper of the appropriate value as per the local stamp duty laws. This is important for legal and official purposes.

**Stamp Duty:**
- The stamp duty required for the dissolution deed varies by jurisdiction. In many places, a specific amount of stamp duty is applicable for dissolution deeds, and it’s essential to check local regulations. For instance, if you are in India, the amount could be different in various states.

### **2. Formation of the New Partnership Firm**

**Documentation Required:**
1. **New Partnership Deed:** A new partnership deed should be prepared for the new firm, which will include the details of the new partnership arrangement. This should outline the new firm’s name, business activities, profit-sharing ratios, capital contributions, and other relevant terms.

2. **Description of Dissolution:** In the new partnership deed, it is essential to include a brief mention of the dissolution of the previous firm to clarify the change. This helps in maintaining a clear record of how the new partnership came into being.

**Stamp Paper:**
- The new partnership deed should also be executed on stamp paper of the appropriate value as per local laws. This ensures that the new partnership is legally recognized.

### **Steps to Follow:**

1. **Prepare and Execute the Dissolution Deed:** Have all parties sign the dissolution deed on the prescribed stamp paper. Ensure that all formalities, including the settlement of accounts and distribution of assets, are clearly stated.

2. **Prepare the New Partnership Deed:** Draft the new partnership deed incorporating all relevant details of the new partnership. Include a note on the dissolution of the old firm to provide context.

3. **Stamp and Register Documents:** Execute the new partnership deed on stamp paper as required by local laws. In some jurisdictions, registration of the new partnership deed with the local authorities may also be necessary.

4. **Notify Relevant Authorities:** Inform the relevant authorities, such as the Registrar of Firms, about the dissolution of the old firm and the formation of the new firm.

### **Summary:**
- **Separate Stamp Paper for Dissolution:** Yes, it is advisable to use separate stamp paper for the dissolution of the old firm.
- **Description in New Deed:** While you can mention the dissolution in the new partnership deed, it does not replace the need for a formal dissolution deed for the old firm.

By following these steps, you ensure that both the dissolution of the old partnership and the formation of the new partnership are handled properly and legally.

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