Introduction

In this article you will learn about " Partnership Deed : Its Meaning, Contents And Importance " in simple language so that you will be able to understand it. Before knowing about partnership deed you should know the definition and importance of partnership. 

What is Partnership? 
Partnership is a group of two or more persons who jointly run the business and earn profits. The persons who have entered into a partnership with one another individually are called partners and collectively a firm. The name under which the business is carried is called firm name. Partnership is created because a single person cannot run a business because many functions have to be performed in a business, hence different people have come forward and create partnership or jointly run the business.

What Is Partnership Deed? 

Partnership Deed also known as Partnership Agreement is a written document between the partners of the firm which states the terms and conditions of the partnership. It is made so that there is no misunderstanding between the partners regarding each other's responsibilities and roles. It is a legal document signed by all the partners and normally has clauses. Although making a partnership deed is not essential, it is still preferred that it is made such that all the rules, regulations and responsibilities of all the partners remain in written form, so that in future there is no conflict between the partners. 



Contents/Clauses Of Partnership Deed

  1. Description of the partners
  2. Description of the firm
  3. Principal place of business
  4. Nature of business
  5. Capital contribution
  6. Interest on capital
  7. Interest on drawings
  8. Profit- sharing ratio
  9. Interest on loan
  10. Remuneration to partners
  11. Valuation of goodwill
  12. Valuation of assets
  13. Rights and duties of partners
  14. Duration of partnership
  15. Death of a partner 
These are some general contents/clauses of partnership deed, apart from this there are some clauses also. 

Importance Of Partnership Deed

Partnership Deed is an important legal document which defines relationship among the partners. It is important to have written Partnership Deed so that disputes do not arise. In case, they still arise they can be resolved on the basis of Partnership Deed. It is important because:-

  • It governs the rights, duties and liabilities of each partner. 
  • Disputes arising, if any, among the partners are settled on the basic of partnership deed. 
  • It helps in removing misunderstanding between the partners because all the terms and conditions are written in it. 
  • It gives a clear understanding to the partners as to what they have to do and what not, due to which the business runs smoothly. 
  • If the Partnership Deed does not exists or where it exists but does not have a clause on a particular matter, the provisions of the Partnership Act, 1932 apply. 

Frequently Asked Questions

Question 1. By what other name is Partnership Deed known? 
Partnership Deed is also known as Partnership Agreement Or Constitution Of Partnership. 

Question 2. Is Partnership Deed always written? 
Partnership Deed can be written or oral, but it is important to have written partnership deed to avoid disputes between the partners. 

Question 3. Is it essential to have a Partnership Deed? 
It is not essential to have Partnership Deed but it is desirable to have a Partnership Deed. 

Question 4. What are the contents of Partnership Deed? 
Description of the firm, description of the partners, capital contribution, profit- sharing ratio, valuation of goodwill, settlement of disputes etc.