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Partnership Deed

The agreement creating a partnership may be implied or expressed. However, to avoid future disputes, it is always better to have the agreement in writing. Such an agreement in writing is called a ‘partnership deed’. It is a document which contains the terms of a partnership, which the partners have mutually agreed upon. The partnership deed should also be stamped properly, as per the Stamp Act, 1889. It must be signed by all the partners. It may or may not be registered.

Contents of a Partnership Deed

The partnership deed usually contains the following particulars:

  • The name of the firm
  • Name and addresses of the of the partners
  • The nature of business which the firm is supposed to do
  • The place of business of the firm
  • Date of commencement of the partnership firm
  • The amount of capital and how it is contributed by each partner.
  • The proportion in which the partners will share the profits and losses
  • The amount of drawings which a partner can draw from the firm.
  • Whether interest on capital will be allowed? If so, then what will be the rate of interest charged on the drawings of the partners?
  • What will be the authority of each partner? Will some restrictions be imposed on the duties of the partners?
  • What will be the duration of the firm? Whether the firm will be dissolved at will or will continue for fixed period or till the happening of a particular event or on the completion of a particular venture?
  • How the amount of the goodwill of the firm will be ascertained at the time of change in profit sharing ratio, admission, retirement or death of a partner?
  • Will some salary or remuneration or commission be allowed to any of the partners because of his working in the firm?
  • How the annual accounts of the firm will be prepared? Will the accounts be audited by an independent Chartered Accountant? How the auditor will be appointed?
  • In case of retirement or death of a partner, how the amount which is to be paid to the partner or his legal representatives is ascertained? If he partners have taken a joint life policy or individual policies, the premium of which is being charged to the Profit and loss Account and on the death of a partner, how the amount received from the insurance company and their surrender value will be distributed among the partners.
  • If a partner has given any amount of loan besides his capital, will interest be allowed to him? Is so, what will be the rate?
  • In case a partner becomes insolvent, how the accounts of the firm will be settled? Will the rule of Garner vs Murray be applicable in this case?
  • The circumstances in which the firm will be dissolved and the manner, in which the accounts will be settled in case of dissolution of a firm.
  • In case some disputes arises among the partners, how will it be settled? Will it be referred to some arbitrator?
  • Any other clause on which the partners may agree at the time of agreement.

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