A partnership is the nature of a business where the partners work together to achieve common goals of the business. The partners are allowed to decide the terms and conditions to be followed by them in the growth of the business. The document which contains those terms and conditions is being called as a partnership deed.

The Indian Partnership Act, 1932, governs the several provisions like rights, duties, powers and liabilities of the partners. The partners are free to bind themselves with the provisions they want to build for their business as most of the provisions are subject to contract to the contrary under the Partnership Act. It means that if partners are agreed to the contrary understanding, then they will prevent the Act.>

CONTENT

There is no specified format prescribed for drafting a partnership deed, but the typical deed contains the following clauses:

• Name of the firm
• Nature of the firm
• Details of the partners
• Place of business
• Date of commencement
• Duration of the existence of the firm
• Capital contribution
• The ratio of loss/profit sharing
• Interest on capital
• Salary payable, if any
• The procedure of admission or retirement
• The method used to calculate the goodwill
• Preparation of accounts
• Mode of settlement of dues
• Duties, power and obligations on partners
• Settlement of accounts
• Arbitration in case of disputes
• Provisions if any partner becomes insolvent

In case when the partnership deed is absent, the following rules are to be followed:

• The profits or losses shall be shared in equal ratio
• Partners are not entitled to interest on the capital
• Salary or any other remuneration will not be given to any partner of the firm
• No interest drawings of the partners
• The interest of 6% per annum would be allowed to apartner if he/she gave any loan to the firm
• Partners have a right to take part in the business
• No other person will be allowed to join the firm without the consent of all existing partners
• The property of the partnership firm should be used for the benefit of the firm itself
• Every partner has a right to inspect the books of accounts of the firm

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