Partnership Deed: Meaning, Benefits and Contents

Partnership Deed: Meaning, Benefits and Contents

6 mins read8.6K Views Comment
Chanchal
Chanchal Aggarwal
Senior Executive Content
Updated on Apr 9, 2024 17:35 IST

A partnership deed is a legally binding document that outlines the terms, rights, and responsibilities of partners in a partnership. It typically includes details about profit sharing, capital contributions, decision-making, and dispute resolution, ensuring clarity and alignment among partners.

2022_12_Partnership-Deed.jpg

From defining profit-sharing ratios to addressing admission and retirement procedures, the partnership deed plays a crucial role in structuring and governing the partnership. It is essential to draft a comprehensive partnership deed with the assistance of legal professionals to protect all partners’ interests and ensure the partnership’s smooth functioning.

A partnership deed is an agreement outlining the terms and conditions of a partnership between partners. One of the common forms of business formation is a partnership firm. Before understanding the meaning of a Partnership Deed, let’s find out what partnership is. 

Explore: Online Law courses and certifications

Table of Content

Explore free corporate law courses

What is Partnership?

A  partnership firm is a company where two or more people work together to manage and run a business, following the conditions and goals outlined in the partnership deed. The deed is a significant document that describes each partner’s authority, responsibility, rights, and obligations. 

Difference Between Partnership And Company
Difference Between Partnership And Company
The article covers the difference between partnership and company on different criteria. Partnership and company are very commonly used terms in the business management field. The article covers the difference...read more

Difference Between Public and Private Company
Difference Between Public and Private Company
Companies can be public and private in nature. While public companies issue its shares to the public, private company limit it to only certain shareholders. In terms of the market...read more

What is Partnership Deed?

A partnership deed, also called a partnership agreement, is a legal document that two or more partners must sign if they wish to operate a business to generate profits jointly. Clear communication between partners about the many rules regulating their partnership is essential to a partnership firm’s efficient and effective operation. The partnership deed accomplishes this.   

It comprises several clauses that define the partners, their profit-loss sharing, salary, interest on capital, drawings, admission of a new partner, etc. The partnership deed can resolve any disputes or conflicts between the partners over the partnership’s rules. It clearly defines each partner’s responsibilities and ensures the efficient operation of the partnership firm. 

 

How to Take Up an LLB Course and Advance Your Law Career in 2024
How to Take Up an LLB Course and Advance Your Law Career in 2024
LLB stands for Bachelor of Legislative Law, originally known as, Legum Baccalaureus in Latin. If you are looking to pursue a law career in India, go for LLB courses. Know...read more

Types of Contract in Business Law: Meaning and Examples
Types of Contract in Business Law: Meaning and Examples
In business law, comprehending contract types is pivotal. Contracts can be divided based on Validity, Formation, Performance, Obligation, Content, Specialized Business Contracts and Duration. Let's understand each of the types...read more

Importance of Partnership Deed

A proper deed establishes a legal obligation between the partners of the company. It is not necessary to register it, though. As a result, you can also operate an unregistered partnership firm.

Here are some examples to demonstrate the importance of a partnership deed:

  • It governs each partner’s powers, responsibilities, and liabilities.
  • Deeds prevent misunderstandings between partners because they outline all the partnership’s terms and conditions beforehand.
  • Partners can consult the partnership agreement in a dispute, making a resolution easier.
  • It clears doubts regarding the profit and loss sharing ratio between partners.
  • It describes the roles and responsibilities of each partner. 
  • Partnership deeds may also include clauses defining the partners’ remuneration (pay). Usually, working partners receive the pay. However, interest is given to each partner who invests money in the business.

As a result, written documents are always preferable than oral agreements.

What is Business Law, and Why is it Important?
What is Business Law, and Why is it Important?
As the backbone of commerce, business law governs every aspect of the economic marketplace, from setting up a business entity to navigating complex contractual agreements. Understanding what is business law...read more
Consumer Protection Act 1986: Definition, Objectives and Features
Consumer Protection Act 1986: Definition, Objectives and Features
The Consumer Protection Act, 1986, is a landmark legislation in India that provides a legal framework for protecting consumer rights and redressing grievances. It establishes specific consumer rights and sets...read more

Contents of Partnership Deed

The significant contents of the partnership deed must be included in it. The main content are listed below:

Name of the Company

According to the Partnership Act’s guidelines, the firm’s partners should choose the name. The name under which a company operates is known as the company name.

Details of the Partners

The deed must list all of the partners’ information, including names, addresses, phone numbers, titles, and other specifics.

Operations of the Company

The deed needs to mention the firm's business, which can be producing goods or offering services.

Duration of the Company

The deed should specify the duration of the partnership firm, whether it is formed for a specific project, a limited time frame, or an indefinite time period.

Location of the Company

The necessary partnership deed contents must include a mention of the primary office location where the partnership is conducted. It should also list the names of additional locations where it does business.

Capital Investment

Each partner will contribute a certain amount of capital to the business. The deed must include information about the firm’s total capital and the share each partner contributed.

Sharing of Gains and Losses

The deed should specify how partners split the firm’s profits and losses. The profits and losses may be divided equally, following the capital contribution ratio or any other agreed-upon ratio.

Remuneration and Commission

The deed should include specific information on the income and commission payable to partners. The partners’ salaries and commissions may be determined by their respective positions, skills, or other capacities.

Drawings by the Partner

The drawings from the firm permitted interest to be paid to the firm on such drawings, if any, and allowed each partner to receive their fair share.

Partnership Loan

It states whether any firm partner can borrow a loan from the company. If a firm can borrow money, the loan’s interest rate and any properties it can use should be prior specified in the deed. 

Partners’ Obligations and Duties

The deed should specify each partner’s rights, obligations, and duties to prevent future disagreements.

Admission, Death, and Retirement of Partners

The deed must include information such as the partner's admission date, the rules governing the admission of a new partner, the partner’s resignation date, and any amendments made upon the partner’s death.

Accounts and Audit

The deed should include details about the firm's audit process and the specifics of creating and maintaining the partnership accounts.

Note: The partnership deed may include additional terms in addition to the general contents/clauses listed above.

Check popular courses

Popular Corporate Law Courses Popular Intellectual Property Courses
Popular Legal Online Courses & Certifications Popular GST and Taxation Courses &

How to Draft a Partnership Deed?

The partnership agreement may be oral or written. However, having a written partnership deed is preferable as it helps resolve potential disputes and is also beneficial for tax purposes and the registration of the partnership firm. After reaching an understanding on the partnership deed’s provisions, all of the partners can create the document. Another option is to have a lawyer prepare it.

As you prepare the partnership document, keep the following things in mind:

  • The execution of it calls for a minimum of two partners.
  • It must be put in writing with everyone’s approval.
  • Clauses and sentences must not be ambiguous. All the details/descriptions of the clauses should be clear. 
  • You must use e-stamp paper with at least Rs.200 value.
  • All of the partners’ signatures must appear on every page of the deed.

Documents Required to Register a Partnership Deed

  • The following paperwork is essential to register a partnership deed:
  • PAN card of all the partners.
  • Evidence proving each partner’s address, such as a voter ID, an Aadhar card, a driver’s license, etc.
  • Proof of the company’s address

Check out topics related to Partnership Deed:

Difference between Act and Law
Difference between Act and Law
An “act” is a formal proposal presented, debated, and approved by a legislative body. A “law” encompasses approved acts along with other legal rules and regulations in a jurisdiction. Once...read more

Difference Between Agreement and Contract
Difference Between Agreement and Contract
The terms “Agreement” and “Contract” are mostly used interchangeably by many of us. But both of these words have a considerable difference among them. Are you aware of the difference...read more

Difference Between Forward and Future Contract
Difference Between Forward and Future Contract
A forward contract is a type of agreement among two parties to purchase or sell an asset (of any kind) at a specified price at a pre-determined future time. A...read more

Difference Between Void and Voidable Contract
Difference Between Void and Voidable Contract
In this article, you will understand what void and voidable contracts are. The main difference between void and voidable contracts is that a void contract is invalid from the time...read more

All About Discharge of Contract
All About Discharge of Contract
The discharge of contract means that the contract no longer has legal validity. It is also known as the termination of the contract. This happens whenever the rights and legal...read more

FAQs

What is a partnership deed?

A partnership deed is a legally binding document that outlines the rights, responsibilities, and terms of the partnership agreement between two or more partners.

What information should be included in a partnership deed?

A partnership deed typically includes details such as the names of partners, capital contributions, profit-sharing ratios, decision-making processes, terms of admission and retirement of partners, and dispute resolution mechanisms.

Is a partnership deed required by law?

While it may not be mandatory in all jurisdictions, it is highly recommended to have a partnership deed in place to establish clarity, avoid conflicts, and protect the interests of the partners.

Can a partnership deed be modified?

Yes, a partnership deed can be modified with the consent of all partners through a mutually agreed amendment process.

Can a partnership function without a written deed?

Yes, a partnership can exist even without a written deed, but it is advisable to have a written agreement to avoid misunderstandings and legal complications.

What happens if there is no partnership deed?

In the absence of a partnership deed, the partnership will be governed by the default provisions of the relevant partnership laws in the jurisdiction.

About the Author
author-image
Chanchal Aggarwal
Senior Executive Content

Chanchal is a creative and enthusiastic content creator who enjoys writing research-driven, audience-specific and engaging content. Her curiosity for learning and exploring makes her a suitable writer for a variety ... Read Full Bio