Procedure to quit partnership

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 April 2013 Hello sir.

I am a partner in a firm and i want to quit partnership with current firm and start my own firm.

What all documents are to be made and procedure to be followed.???

CA G. SURYANARAYANAN

CA G. SURYANARAYANAN (Expert)
Follow

25 April 2013 You have to first send a notice of resignation to the other Partners. If it is on mutual agreement, you must finalise the accounts of the Partnership on a cut off date and arrive at the profit or loss as the case may be and determine the amount due to you as per accounts plus value of goodwill if any as agreed. You must then enter into a Deed of Retirement of Partners and if they are only two Partners a Deed of Dissolution after settling the dues. Then you have to give notice of Retirement or Dissolution to the respective Registrar of Firms where the firm is registered, if any. As per the stamp Act, it should be on a Rs.150/- value stamp paper.

CA G. Suryanarayanan

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

25 April 2013 Thanks a lot sir.

But what all i need to send to the ICAI regarding the retirement.?

Upgrade to CAclubindia Pro. Subscribe Now!

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
Follow

10 August 2024 When a partner decides to quit a partnership firm and start a new firm, several procedural and documentation steps need to be followed. Additionally, if you're a Chartered Accountant (CA) and the partnership firm is registered with the Institute of Chartered Accountants of India (ICAI), there are specific requirements for notifying the ICAI about your retirement. Here's a detailed guide to the process:

### **1. Procedure for Retirement from Partnership Firm:**

#### **A. Internal Firm Procedures:**

1. **Review Partnership Deed:**
- Check the existing partnership deed to understand the terms and conditions related to retirement. This will guide the process of retirement and settlement of accounts.

2. **Draft a Retirement Letter:**
- Prepare a formal retirement letter addressed to your partners, stating your intention to retire from the partnership. This letter should mention the effective date of retirement and any specific terms agreed upon for the retirement.

3. **Settlement of Accounts:**
- Conduct a detailed audit of the firm’s accounts to determine the financial settlement due to you. This includes your share of profits, losses, and any capital balance.
- Prepare a settlement agreement if necessary, outlining how the financial aspects will be settled.

4. **Amend Partnership Deed:**
- Draft and execute a revised partnership deed reflecting the change in partnership structure. This deed should be signed by the remaining partners.

5. **Public Notice:**
- Publish a public notice in a local newspaper regarding your retirement from the partnership to inform third parties and avoid future liability for the firm’s actions.

6. **Update Firm Registration:**
- Update the firm’s registration with relevant authorities, if applicable, to reflect the change in partners.

#### **B. Legal Documentation:**

1. **Retirement Deed:**
- Draft a formal retirement deed, detailing the terms of your retirement, settlement of accounts, and any other relevant clauses. This document should be signed by all partners and notarized if required.

2. **Intimation to Tax Authorities:**
- Inform the tax authorities (e.g., Income Tax Department) about the retirement. Update the firm's records accordingly.

3. **Cancellation or Transfer of Licenses:**
- If the firm holds any licenses, registrations, or certificates in your name, ensure they are either canceled or transferred as necessary.

### **2. Starting Your New Firm:**

1. **Business Registration:**
- Register your new firm as per the legal requirements (e.g., as a sole proprietorship, partnership, LLP, or private limited company). Obtain necessary registrations like GST, PAN, and others.

2. **Draft New Partnership Deed (if applicable):**
- If starting a new partnership firm, draft a new partnership deed outlining the terms, roles, and responsibilities.

3. **Open Bank Accounts:**
- Open a new bank account in the name of your new firm.

4. **Obtain Licenses and Permits:**
- Secure any industry-specific licenses or permits required for your new business.

### **3. Reporting to ICAI:**

1. **Submission of Retirement Intimation:**
- Draft a formal letter informing ICAI of your retirement from the partnership firm. This letter should include details such as the effective date of retirement and the name of the firm.

2. **Documents to be Submitted:**
- **Retirement Letter to ICAI:** Include details of the retirement and effective date.
- **Copy of the Retirement Deed:** Provide a copy of the executed retirement deed.
- **Form 18:** Fill out and submit Form 18, if required by ICAI, which relates to changes in partnership status.
- **Firm’s Update:** If applicable, provide details about any changes in the firm’s registration with ICAI.

3. **Follow ICAI’s Instructions:**
- ICAI may have specific requirements or forms to be submitted for recording the retirement. Ensure to follow any instructions provided by the ICAI.

4. **Update Your Professional Status:**
- Update your status with ICAI if required, such as updating your membership status or registering your new firm if applicable.

### **Summary:**

- **Retirement Process:** Review the partnership deed, draft a retirement letter and deed, settle accounts, amend the partnership deed, and notify the public and tax authorities.
- **New Firm:** Register the new firm, draft a new partnership deed (if applicable), open bank accounts, and obtain necessary licenses.
- **ICAI Reporting:** Submit a retirement letter, a copy of the retirement deed, and any required forms to ICAI, and follow their specific instructions for updating your professional status.

Consult with a legal or professional advisor to ensure compliance with all legal and regulatory requirements during this transition.