Partnership firm

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 November 2015 Dear Sir,
There is a partnership firm having 7 partners. Six partners out of total 7, wish to retire from the firm from 25/11/2015. And remaining one partner will carry on the business.

What are the formalties that firm partners have to do.

Please advise me.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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25 November 2015 1. Prepare a retirement deed in stamp paper of requisite value.

2. Give public notice about the retirement.

3. Inform the IG of registration ( Registrar of firms)regarding retirement by filing the requisite form.

4. Inform the VAT office by filing the requisite form.

5. Surrender the PAN and TAN for deactivation before the jurisdictional authorities.

Querist : Anonymous

Querist : Anonymous (Querist)

25 November 2015 what is the difference between retirement deed and dissolution deed?

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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09 August 2024 A **retirement deed** and a **dissolution deed** serve different purposes in the context of partnership firms. Here’s a detailed explanation of each:

### **1. Retirement Deed**

**Purpose:**
- A **retirement deed** is used when one or more partners wish to retire from an existing partnership firm, but the firm itself will continue to operate with the remaining partners or new partners.

**Key Features:**
- **Continuity of Firm:** The partnership firm continues its business operations even after the retirement of one or more partners.
- **Retiring Partner’s Rights:** The deed outlines the terms and conditions related to the retiring partner’s exit, including the settlement of their capital account, share of profits, and any other dues.
- **Revised Partnership Deed:** After the retirement, a revised partnership deed is often drafted to reflect the changes in the partnership structure, including the remaining or new partners.
- **Liabilities and Assets:** The retirement deed will detail the distribution of assets and liabilities, including how the retiring partner’s share will be handled.

**Example Clauses:**
- Date of retirement
- Settlement of the retiring partner’s account
- Transfer of the retiring partner’s share of the firm’s assets and liabilities
- Changes in the profit and loss sharing ratio
- Continuation or termination of existing agreements or contracts

### **2. Dissolution Deed**

**Purpose:**
- A **dissolution deed** is used when the partnership firm is being completely dissolved and ceases to operate. This deed outlines the process of winding up the firm’s affairs.

**Key Features:**
- **Termination of Firm:** The firm ceases to exist after the dissolution. The business operations are stopped, and all assets are liquidated.
- **Winding Up:** The dissolution deed details the steps to wind up the firm’s affairs, including settling outstanding liabilities, distributing remaining assets, and finalizing accounts.
- **Final Settlement:** The deed specifies how the remaining assets and liabilities are divided among the partners after paying off all debts and obligations.
- **Legal Formalities:** It may include legal formalities required to formally end the firm’s existence, such as notifying relevant authorities.

**Example Clauses:**
- Date of dissolution
- Settlement of all outstanding liabilities and obligations
- Distribution of assets among partners
- Closure of bank accounts and other financial matters
- Notification to regulatory bodies and authorities
- Procedures for final accounting and filing of tax returns

### **Comparison**

| Aspect | Retirement Deed | Dissolution Deed |
|--------------------------|-----------------------------------------------------|-----------------------------------------------------|
| **Purpose** | To handle the exit of one or more partners while continuing the firm | To completely dissolve the firm and wind up its affairs |
| **Firm Status** | Firm continues with remaining or new partners | Firm ceases to exist |
| **Liabilities** | Settled among remaining partners and retiring partner | Settled completely before firm’s closure |
| **Assets** | Settled with the retiring partner and remaining partners | Liquidated and distributed among all partners |
| **New Partnership Deed** | May require drafting a revised partnership deed | Not applicable as the firm is closed |

### **Summary**

- **Retirement Deed:** Used when one or more partners leave the partnership, but the firm continues to operate. It addresses the terms of the partner’s exit and adjusts the partnership structure accordingly.
- **Dissolution Deed:** Used when the partnership firm is closing down entirely. It outlines the process of winding up the firm’s affairs, settling liabilities, and distributing assets.

Each deed has specific legal and procedural implications, and it's essential to ensure that all relevant aspects are properly addressed in the documents. For tailored guidance, consulting with a legal professional or a chartered accountant is advisable.

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