Question

Define Partnership Deed. Discuss its main contents.

Answer 1

Partnership is an agreement between persons to carry on a business. The agreement entered into between partners may be either oral or written. But, it is always desirable to have a written agreement so as to avoid misunderstandings and unnecessary litigations in future. When the agreement is in written form, it is called ‘Partnership Deed.’ It must be duly signed by the partners, stamped and registered. Any alteration in partnership deed can be made with the mutual consent of all the partners.

Although it is left to the choice of the partners of the firm to decide themselves as to what should be mentioned in their partnership deed, yet a partnership deed generally contains the following:

1. Name of the firm.

2. Nature of the business.

3. Names of partners.

4. Place of the business.

5. Amount of capital to be contributed by each partner.

6. Profit sharing ratio between the partners.

7. Loans and advances from the partners and the rate of interest thereon.

8. Drawings allowed to the partners and the rate of interest thereon.

9. Amount of salary and commission, if any, payable to the partners.

10. Duties, powers and obligations of partners.

11. Maintenance of accounts and arrangement for their audit.

12. Mode of valuation of goodwill in the event of admission, retirement and death of a partner.

13. Settlement of accounts in the case of dissolution of the firm.

14. Arbitration in case of disputes among the partners.

15. Arrangements in case a partner becomes insolvent.