Partnership Deeds

A partnership is a unique form of business in which partners work together to achieve common goals. Due to this feature of partnerships, partners are allowed to decide terms of their relationship with each other. The documents which they do so are called partnership deeds. The Indian Partnership Act, 1932 governs partnership forms of businesses in India. This law contains several provisions defining rights, duties, liabilities, and powers of partners. These provisions, however, are not always binding on them. Partners are free to bind themselves with contrary provisions.

Partnership deed is 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.

Unlike similar documents like articles of association of companies, partnership deeds need not be registered mandatorily. However, registration can ensure prevention of legal challenges to its validity when disputes arise. An ideal partnership deed is comprehensive and clear about all details pertaining to the functioning of a firm. It should not contain any ambiguities.

Contents of Partnership Deeds

Although there is no specific format prescribed for drafting a partnership deed, a typical deed contains the below-mentioned clauses.