Specialised practice
Deeds, Agreements & Business Documentation
The clause that costs money is almost never the one that was negotiated. It is the one nobody thought about, drafted from a template, and read for the first time three years later by someone looking for a reason to disallow.
Documents are usually drafted for the moment of signing. What determines their cost is how they read afterwards — when a partner leaves, when the accounts are audited, or when a deduction claimed under them is examined. A deed that records the commercial understanding accurately but says nothing about how remuneration is to be quantified is a perfectly good record of the arrangement and a poor tax document.
The example worth knowing is the partnership deed. Remuneration and interest paid to partners are deductible to the firm only where the deed authorises them and sets out the basis on which they are to be worked out. A deed silent on the point, or one that merely says remuneration will be as mutually agreed, puts that deduction at risk for every year it remains in force. It can be corrected — but an amended deed operates from its own date, not from the year the disallowance arose.
This is drafting done with the tax and GST consequences considered as the document is written rather than discovered later. Where a matter properly belongs with an advocate — a dispute, conveyancing of immovable property, testamentary documents — it is referred, and that is said at the outset rather than after work has begun.
Partnership and LLP documents
- Partnership deeds on constitution of a firm
- Clauses governing partner remuneration and interest, drafted so the deduction is available
- Admission, retirement, death of a partner, and reconstitution
- Changes in profit-sharing ratio, capital contribution and drawings
- Dissolution deeds, and documentation of the settlement of accounts
- LLP agreements and supplementary agreements
- Conversion of a firm to an LLP, and the documentation it requires
Business agreements and documentation
- Service, consultancy and professional engagement agreements
- Supply, distribution and vendor agreements
- Memoranda of understanding and letters of intent
- Loan agreements, including between related parties
- Lease and leave-and-licence (Rent) agreements, from a tax and deduction standpoint
- Family arrangements, gift deeds and succession documentation
- Documentation of transactions between connected persons
Review and advisory
- Review of drafts prepared elsewhere, for their tax and compliance effect
- Deduction of tax at source arising from payment and consideration clauses
- GST treatment — classification, place of supply, and who bears the tax
When this applies
Situations this covers
You are forming a firm or an LLP
The deed written at the start governs everything that follows, and it is far easier to settle terms while everyone is agreeable than to negotiate them at the point of departure.
A partner is joining, retiring, or has died
Reconstitution affects profit sharing, capital accounts and the treatment of goodwill, and it has tax consequences for the firm and for the partners separately.
Remuneration or profit sharing is changing
Changes have to be documented before they take effect. A payment made under an arrangement that the deed does not yet authorise is difficult to defend.
An agreement has been drafted for you elsewhere
A document may be sound commercially and still create an unintended deduction or a GST exposure. A read from that angle takes little time.
The arrangement is entirely verbal
Common between family members and long-standing associates, and the point at which it causes difficulty is usually a death, a dispute, or an assessment — none of which can be anticipated.
Assets are being passed within the family
How a transfer is documented affects its tax treatment, and whether it holds up if questioned later.
Method
How the work runs
- 01
Establish what the parties have actually agreed
Drafting begins from the commercial arrangement, not from a precedent. A template applied to an arrangement it was not written for is the most common source of trouble.
- 02
Identify the consequences before drafting
Income tax treatment, deduction at source and GST are each considered against the proposed terms, so the drafting accommodates them rather than triggering them.
- 03
Draft, and explain what has been drafted
The document is prepared and the clauses that carry consequence are explained in plain terms, so the parties know what they are signing and why it is worded as it is.
Questions
Commonly asked
General information on procedure. It is not advice on any particular matter.
Do I need a lawyer for this, or can a Chartered Accountant do it?
Partnership deeds, LLP agreements and ordinary commercial documents are routinely drafted by Chartered Accountants, and the tax and compliance consequences of the terms are squarely within that work. Some matters belong with an advocate — anything in dispute or heading there, conveyancing of immovable property, and testamentary documents such as wills. Where that is the position you will be told at the outset, and the firm can work alongside counsel rather than in place of one.
Why does the partnership deed matter so much for tax?
Because deductions the firm claims for payments to its own partners depend on it. Remuneration and interest are allowable only where the deed authorises them and states the basis on which they are to be quantified — a deed that is silent, or that leaves the amount to be agreed later, puts the deduction in question. The same deed also determines how a reconstitution or dissolution is treated. It is examined in assessment far more often than it is read by the partners.
We have always worked on an understanding. Is that really a problem?
It works until it does not. A verbal arrangement offers no answer when a partner dies, when the parties remember the terms differently, or when an assessing officer asks on what basis a payment was made. The cost of recording it is small and one-time; the cost of not having it falls at the least convenient moment.
Can you review a draft someone else has prepared?
Yes, and it is a sensible step. A review looks at the document for its tax, deduction at source and GST effect, and flags clauses that create consequences the parties may not have intended. It is a defined piece of work and does not require the document to be redrafted.
What does it cost?
Professional fees depend on the nature of the document, the number of parties and whether the engagement is drafting from scratch or reviewing an existing draft. Scope and the basis of fees are agreed in writing before work begins. Fee rates are not published on this website.
Is the arrangement written down properly?
A deed is read years later, by a partner who was not there, or by an assessing officer looking for what it does not say. That is the reader it has to satisfy.
Related services
- Business & Tax AdvisoryAdvisory on business structure, transactions and the tax consequences of proposed decisions.
- Business Registration & ROCFormation of proprietorships, partnership firms, LLPs and companies, the registrations that follow, and ongoing Registrar of Companies compliance.
- Income TaxTax planning, advisory and return filing for individuals, firms and companies.
- NRI TaxationIndian tax compliance and advisory for non-residents, covering residential status, DTAA relief and repatriation.