PARTNERSHIP DEED

What is a Partnership?
A partnership is a form of business in which two or more persons conduct the business activities or any
of the persons involved acting in behalf of all of them.

What is a Partnership Deed?

A partnership deed is an agreement made between two individuals who have agreed to share the profits
of a business in which they are partners.

Essential Points in a Partnership Deed

1. Name and address of the partners
2. Name and nature of the firm
3. Capital contribution of each partner
4. Date of commencement
5. Duration/period
6. The drawings that can be made by each partner

Advantages of Partnerships
There are various advantages of partnerships, including:
1. Easy to establish
2. Low cost
3. Two or more people
4. Flexible, not rigid
5. Tax advantages
Other advantages
1. No burden of management and risk
2. Combined skill and judgments
3. Dissolution of the firm is easy

Disadvantages of Partnerships
1. Unlimited liability
2. Limited source of capital
3. No independence
4. Uncertainty
5. Foundation on the transfer of interest
6. Liability after retirement
7. No separate entity from partners

Types of Partnership Deeds

There are three types of partnership deeds:
1. General partnership
2. Limited partnership
3. Limited liability partnership
1. General Partnership
A general partnership involves two or more persons carrying out a business purpose or any of them
carrying it out for all of the parties. The partners share equal rights and responsibilities in relation to the
business. An individual partner can bind the entire group in a legal obligation. In a general partnership,
the concept of risk and return follow; here, the profits are distributed equally and liabilities are shared
equally. General partnerships are further classified as follows:
 Partnership at will
 Particular partnerships
Exceptions in General Partnership When there is a Minor Partner, the liability of the Minor is limited to
the amount of their share in the capital. The Minor is not personally liable for the firm’s debts.

2. Limited Partnership
Limited partnerships involve one general partner with unlimited liability and other partners with limited
liability. Limited partners do not have control over the daily operations of the business and they also
have limited control over the business.

3. Limited Liability Partnership

In a limited liability partnership, each partner holds liability to the extent of their investment in the
business. At the time of liquidation, partners are not personally liable to pay the firm's debts. Limited
liability partnerships are not included in the Partnership Act. This includes the Limited Liability
Partnership Act 2008.
What Factors are Required to Form a Partnership Deed?
A partnership deed is chiefly formed based on the following factors:
1. A partnership deed is mostly said to be a contract that is made between the partners of the
business. This binds each of the partners in a legal relationship.
2. The minimum requirement for forming a partnership is that there are at least two members and
with no more than 10 members in the case of banking and 20 in the case of non-banking
businesses.
3. Every partner must have a mutual understanding in terms of how the business should be carried
out.
4. The ratio for profits and losses must be decided in advance by all partners.
5. Every partner must maintain the relationship as a principal-agent. Each partner is accountable
for the activities carried out by the other partners.

Contents of Partnership Deeds

A standardized partnership deed must contain the following details:
1. Names and addresses of the firm
2. Business to be carried out by the company's partners
3. The duration of the partnership firm relating to whether it is made for a limited period or a
specific venture
4. Profit- and loss-sharing ratios amongst partners
5. Details of remuneration and commission (if any) payable to partners
6. The partners' capital contributions
7. The interest on capital to be paid to partners
8. Policies relating to the drawings from the firm allowed for each partner, as well as interest (if
any) to be paid by the partner to the firm on such drawings
9. The rate of interest on partner’s capital, partner's loan, and interest (if any) to be charged on
drawings
10. Duties and Obligations of Each Partner
11. Each partner must conform to the rules setting out how to respond when a partner retires or
dies
12. Division of undertaking and responsibility (i.e. the duties, powers, and obligations of each
partner)
13. The method of preparing accounts and arrangements for audit
14. The mode of auditor’s appointment, if any
15. The treatment of losses arising from the insolvency of one or more partners
16. Settlement of accounts on the dissolution of the partnership firm
17. Methods to be followed regarding the settlement of disputes amongst the partners
18. Other matters concerning the conduct of business.
19. The above list is not comprehensive. It is worth noting that, in addition to the items outlined
above, any matters affecting the association of partners are typically covered in the partnership
deed.
Additional Points
The partnership deed must be made on stamp paper and every partner must have a copy of the
partnership deed. A copy of the partnership deed must also be filed with the Registrar of Firms if the
firm is being registered.
Absence of a Partnership Deed
1. If no partnership deed is created, the following rules apply:
2. The partners have an equal share in the profits and losses of the business
3. The partners do not receive a salary
4. Interest on capital is not payable
5. Drawings are not chargeable with interest
6. Partners will receive 6% per annum interest on loans to the firm if they mutually consent
 PARTNERSHIP DEED

THIS DEED OF PARTNERSHIP is executed at New Delhi on this ……day of ……..

BETWEEN

Sh. X S/o _____ R/o____, hereinafter called ‘THE FIRST PARTY’ which expression shall mean and include
his heirs, successors, executors and legal representatives.

AND

Sh. Y S/o Sh. ____ R/o ______, hereinafter called ‘THE SECOND PARTY’ which expression shall mean and
include his heirs, successors, executors and legal representatives.

WHEREAS the First Party is in occupation as a tenant of property measuring 1000 sq. ft. on the ground
floor bearing No. E-1 Ram Nagar, Delhi.

AND WHEREAS the First Party is desirous of carrying on the business of interior decoration and the
Second Party, being experienced in this trade, has approached the First Party to run this business with
him jointly in partnership.

AND WHEREAS the parties have agreed to commence and run the business of interior decoration,
furnishing, manufacture and sale of furnishing, manufacture and sale of furniture, soft furnishing and
accessories in partnership.

NOW, THEREFORE, THIS DEED WITNESSES AS UNDER:

1. The name and style of this partnership business shall be M/s XYZ.
2. The business of this partnership shall be considered to have commenced on………
3. That the principal place of business of this partnership shall be at E-1 Ram nagar, Delhi.
However, the same may be shifted or carried on elsewhere as well with the mutual consent of both the
parties from time to time.
4. That the business of the partnership shall be interior decoration, furnishing, manufacture and sale of
furniture, soft furnishing and accessories. However, the parties will also be entitled to extend their
activities into business or manufacturing of any other item as well.
5. The shares of the parties in the profits and losses shall be as follows :
i) First Party – 51% ii) Second Party – 49%
6. The initial capital has been contributed by both the parties by investing a sum of Rs. 15,000/- each. If
and when more funds are required for the business, the partners shall invest the same. However, any
capital investment of the partners shall not carry any interest. In case loans or deposits are raised from
outside i.e. friends and relations of the partner or the financial institutions then only those loans or
deposits, which are taken with the written consent of both the partners and are entered in the books of
accounts of the partnership, shall be binding on the firm.
7. The partnership shall maintain regular books of accounts in accordance with the customs of trade and
all dealings of the partnership shall be duly recorded in the same. The account books etc. shall be
maintained in the place of business at . E-1 Ram Nagar, Delhi.
8. Each of the partners shall be entitled to withdraw a sum of Rs. 2000/- every month which shall be
adjustable in the final profit and loss account to be prepared every year.
9. The First Party shall also be entitled to withdraw a sum of Rs. 5000/- per month towards the rent he is
paying to the Landlord in respect of the portion of property no. E-1 Ram Nagar, Delhi
10. The tenancy rights in respect of property no. E-1 Ram Nagar, Delhi shall always vest in the First Party
and whenever the partnership is dissolved for any reason whatsoever, the Second Party shall not be
entitled to any right, title or interest in the same.
11. That the partnership shall maintain proper books of accounts in the normal course of business at the
principal place of its business and the same shall always be open for inspection to the partners.
12. That the first accounting period of the partnership shall close on 31st March… and thereafter the
financial year, shall run from 1st April every year to 31st March of the subsequent of the English
calendar.
13. That the bank accounts of the partnership and / or its branches shall be operated under the
signatures of any of the partners.
14. That at the close of the accounting period / year, a trial balance, profit and loss account and balance-
sheet etc. shall be prepared and the profit and loss in the ration enumerated above shall be credited /
debited to the capital account of the partners.
15. That either of the parties would not be entitled to carry on similar or competitive trade individually
or in partnership and in any other manner.
16. The partnership shall be at Will. However, whenever any party intends to dissolve the same or retire
from the same, he shall give an advance notice of 15 days to the other party and during the period of
notice, profit and loss account, balance sheets shall be completed to finalize the accounts in between as
partiers as well as with the outsiders.
17. That in the event of any dispute arising between the parties with respect to any clause of this
document or the working of the partnership or for anything indicated thereof, the same shall be decided
by arbitration in accordance with the provisions of the Arbitration Act and by no other process.
18. That in all other matters not provided herein, the partnership shall be governed by the Indian
Partnership Act as applicable from time to time.

IN WITNESS WHEREOF the parties have signed this document on the date first above written in
presence of the following witnesses.

FIRST PARTY

SECOND PARTY

WITNESSES
(1)

(2)

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