A partnership deed is a type of partnership agreement among the members of the firm which defines the terms and conditions of the partnership between the two partners in a firm or company. The main purpose of this partnership deed is to provide a clear understanding of the role of each partner in a firm or business, which ensures the smooth running of the work in a firm.

The partnership deed comes into popularity when:

What Is Partnership Deed
  • It is an outcome of the agreement between the two partners.
  • This agreement can be in any form written or oral.
  • This act does not demand that the agreement should be done in written form only. 
  • It comprises all the attributes in which all the characters which are influencing the associations between the two partners are counting the aim of trade.
  • The contribution of both the partners will be in the ratio of profit or loss will be divided by the partners and privilege and entitlement of partners to interest on the loan, interest on capital, etc.
Partnership Deed

Partnership Deed Contents:

While making a partnership deed between two persons, all the provisions and legal point of the partnership deed are included in this partnership deed. This type of deed also included the basic guidelines for future projects which can be used as evidence at the time of conflict legal procedures. For a general partnership deed, we need some important information which is listed below:

  • The date on which the business is commenced.
  • Firm’s existence time duration.
  • Amount of capital contributed by each partner.
  • The profit-sharing ratio between the two partners.
  • Duties, obligation and power of each partner of the firm.
  • The salary and commission if applicable which can be payable to the partner.
  • The process of admission or retirement of the partner.
  • The method is used for the calculation of goodwill.
  • The procedure must be followed in the case of a dispute arising between the partners.
  • Procedure for cases where the partners become insolvent.
  • Procedure for the settlement of the accounts in the event of dissolution of the firm.

Importance of Partnership Deed?

There are some main advantages of a well-drafted deed which are given below in the form of a list:’

  • It guides and sees the rights, responsibilities and liabilities of all the partners which are working in a firm.
  • It avoids all the disputes between the two partners.
  • It avoids the confusion between the profit and loss distribution ratios among the two partners.
  • It clearly mentioned that individual partners are responsible for their own.
  • This deed also defines the remuneration or salary of the two partners in the firm. Hence, whatever the interest is paid to each partner who has invested the capital in the business or firm.