Partnership deeds, in very simple words, are an agreement between partners of a firm. This agreement defines details like the nature of the firm, duties, and rights of partners, their liabilities and the ratio in which they will divide profits or losses of the firm.
Although the drafting of partnership deeds is not compulsory, it is always advised to do so. This helps in ensuring that all terms agreed by partners exist in written form on paper. Doing so can reduce disputes between partners and govern their functioning better.
Contents of Partnership Deeds
Although there is no specific format prescribed for drafting a partnership deed, a typical deed contains the below mentioned clauses.
1.The name of the firm
2.Name and details of all partners
3.Date of commencement of business
4.Duration of the firm’s existence
5.Capital contributed by each partner
6..Profit/loss sharing ratio
7.Interest on capital payable to partners
8.The extent of borrowings each partner can draw
9.Salary payable to partners, if any
10.The procedure of admission or retirement of a partner
11.The method used for calculating goodwill
12.Preparation of accounts of the firm
13.Mode of settlement of dues with a deceased partner’s executors
14.The procedure followed in case disputes arise between partners
