Partnership is a relationship between two or more persons, when business is started with partnership then there is an agreement between the partners, the same agreement is called partnership deed in partnership firm. Partnership deed can be registered and unregistered, it entirely depends on the partners as partnership law does not compel registration. Registration and non-registration of partnership deed has its own advantages and disadvantages.
Table of Contents
What is Partnership Deed?
Meaning of Partnership Deed
Partnership deed is an agreement between the partners stating the terms and conditions and it is signed by all the partners.
In simple language, partnership deed is an agreement between the partners. Everything that is necessary to run a business is written in it like what will be the nature of the business, who will participate in the business to what extent etc.
Definition of partnership deed
According to Eric L. Kohler – “Partnership deed is an instrument drafted and signed by partners for defining the various rules and regulations of the firm.”
Contents/elements of Partnership Deed
Following are the contents/elements of Partnership Deed:
1. Name of the Firm:
The name under which the partners want to do business is mentioned in the partnership deed.
2. Place of Business:
This clause specifies the place of business where the business will be conducted.
3. Details of Partners:
In this clause, details of partners are given like name of partners, address of partners, etc.
4. Nature of Business:
In this section, the partners of the firm need to state what type of business they will run.
5. Duration of Partnership:
Partners have to mention how long they want to run the business. for example, short-term duration, long-term duration, etc.
6. Profit Sharing Ratio:
The partners must specify the mutual profit-sharing ratio. Profit and loss are determined according to the profit-sharing ratio. The higher the ratio, the greater the profit or loss.
7. Partners Loan:
The partner has to state in the partnership deed that if a partner gives a loan to the business or takes a loan from the business, then how much interest rate will be applicable on it?
8. Partner Drawings:
Withdrawal means the amount withdrawn from the business by the partners for personal use. Partners have to mention whether the drawing is applicable or not and if applicable, specify the limits.
9. Interest in Drawing:
Partners must specify whether interest will apply on withdrawals, specifying the limit if applicable.
10. Interest on Capital:
Capital refers to the investment made by the partners in the business. Partners must specify whether interest on capital will apply and specify the limit if applicable.
11. Partner’s Salary and Commission:
The partners of a partnership firm have to declare how much salary, commission, bonus, and fees the partners will receive.
12. Powers, Duties of Partners:
In the partnership deed, the partners have to clearly mention the rights and duties of the partners.
13. Arbitration:
Arbitration/Mediation means that if any dispute arises between the partners, then how will they solve their problem and who will play the role of mediator in the mediation. Partners have to mention about arbitration in the partnership deed.
Note: The above does not mention the contents of the Partnership Deed in full.
Read Also:
QNA/FAQ
Q1. What is Partnership Deed?
Ans: Partnership deed is an agreement between the partners stating the terms and conditions and it is signed by all the partners.
In simple language, partnership deed is an agreement between the partners. Everything that is necessary to run a business is written in it like what will be the nature of the business, who will participate in the business to what extent etc.
Q2. Write the definition of partnership deed.
Ans: According to Eric L. Kohler – “Partnership deed is an instrument drafted and signed by partners for defining the various rules and regulations of the firm.”
Q3. Write the features of partnership deed.
Ans: Following are the features of partnership deed:
1. Name of the Firm
2. Place of Business
3. Details of Partners
4. Nature of Business
5. Duration of Partnership
6. Profit Sharing Ratio
7. Partners Loan
8. Partner Drawings
9. Interest in Drawing
10. Interest on Capital
11. Partner’s Salary and Commission
12. Powers, Duties of Partners
13. Arbitration
