A partnership deed is the essence of a Partnership Firm. It is literally the charter of the partnership firm which governs the operations, changes and other aspects of the firm within the ambit of the law. A partnership deed is an agreement between two or more persons who come together to form the partnership. It should specifically make provisions for rights, duties, profits shares and other obligations of each partner is mentioned. This deed does not necessarily have to be in writing. It may be oral as well. However, it is highly advisable to have a partnership deed in writing and registered with the registrar of partnership to ensure its acceptance as evidence and avoid any complications pertaining to the charter of the firm.
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A partnership deed generally comprises of the following elements:
a. Details of the Partners: Name, Address and occupation of the partners;
b. Details of the Firm: Name of the firm, Address of the Firms, business activity to be undertaken by the firm
c. Capital: Details of Capital infused or contributed by the partners
d. Date of Commencement of the business
e. Profit-Sharing: A partnership deed should clearly describe the ratios in which the profits and loses of the firm shall be distributed.
f. Interest Clause: The deed should make provisions for interest on loans given, capital contributed and drawings made by the partners of the firm.
g. Remuneration Clause: The deed should also define the salaries, remunerations, commissions or any other form(s) of payments to be made to the partners.
h. Rights & Duties of Partners: A well-drafted partnership deed should contain provisions clearly defining the rights & duties of all the partners of the firm, whether active or inactive.
i. Changes in Partnership: The processes to be followed in case of changes in the structure of partnership or business of the partnership shall be provisioned in the deed. The deed should also define the process to be undertaken in case of retirement, cessation, death or induction of any partner in the firm.
