Partnership Agreement/Deed

Partnership agreement in writing is called partnership deed. Partnership deed is a document which is signed by all the partners and which contains all the matters determining and governing the mutual rights, duties and liabilities of the partners in the conduct and management of the affairs of the partnership. It may also be referred to as articles of partnership” containing the name, nature of business, capital, duration of the firm, etc.

Need and Importance of Partnership Deed.

It has been observed that partners start bickering and quarrelling after (he firm has worked for some time. It is, therefore, advisable that the articles of partnership should be drawn up through the lawyer. A partnership deed on stamp paper is considered to be valid in the court against any dispute. The importance of partnership deed can be judged from the following facts.

1. It forms the basis of formation of the partnership.

2. It defines the mutual rights, duties and liabilities of the partners.

3. It helps in minimizing the areas of disputes among the partners.

4. It serves as guidepost for the conduct of firm business.

The partnership deed usually contains the following clauses.

1. Name and location of business.

2. The nature of the business.

3. The amount of capital to be contributed by each partner.

4. Provisions or reinvestment in business.

5. The duties, powers and obligations of all the partners.

6. Length or life of business.

7. The method of distribution of profit and sharing of the losses.

8. Method of admitting a new partner.

9. Procedure for withdrawal of a partner.

10. The method of valuation of goodwill on and or retirement or death of a partner.

11. Method of revaluation of assets or liabilities on admission, retirement or death of a partner.

12. Procedure to be followed for expulsion of a partner.

13. Arrangements to be followed in case a partner becomes insolvent.

14. Salary, if any, payable to the partners for managing the firm.

15. The method of preparing accounts and arrangement for audit.

16. Procedure for the dissolution of the firm and settlement of accounts.

17. Arbitration in case of disputes among partners.

18. Operation of bank account.

The above items are not the final list of clauses. Any clause mutually agreed to by the partners can be Included in the agreement. If the deed is silent on any point, then the provisions of Partneiship Act of 1932, will apply.