Partnership Deed – Contents & Legal Requirements

The constitution of partnership – your business bible!

What is Partnership Deed?

Definition: Written agreement specifying terms and conditions of partnership.

Is it mandatory? NO! Partnership can be oral.
Should you have it? ABSOLUTELY YES!

Why?
Without deed → Disputes → Courts apply default rules → May not suit you!

Contents of Partnership Deed

1. Name of Firm

Example: "Sharma & Associates"

2. Names & Addresses of Partners

Example: Ram Sharma (Delhi), Mohan Verma (Mumbai)

3. Nature of Business

Example: "Chartered Accountancy Services"

4. Date of Commencement

Example: 1st April 2024

5. Duration

Example: "Perpetual" or "5 years"

6. Capital Contribution

Example:

• Partner A: ₹10 lakhs
• Partner B: ₹15 lakhs

7. Profit & Loss Sharing Ratio

Example: 40:60 (A gets 40%, B gets 60%)

8. Interest on Capital

Example: "6% per annum on capital"

9. Drawings & Interest on Drawings

Example: "Maximum ₹50,000/month, interest @ 10% p.a."

###10. Partners' Duties & Rights Example:

• Partner A: Handles audit
• Partner B: Handles taxation

11. Admission of New Partner

Example: "Requires unanimous consent"

12. Retirement/Death Procedures

Example: "Retiring partner gets capital + goodwill"

13. Dispute Resolution

Example: "Arbitration by Senior CA"

14. Salary/Remuneration (if any)

Example: "Active partner gets ₹50,000/month salary"

Default Rules (if Deed is Silent)

Example: A invests ₹10L, B invests ₹2L, no deed → Both get 50% profit! (Unfair to A!)

Stamp Duty & Registration

Stamp Duty: Partnership deed must be on stamp paper
Amount: Varies by state (₹500-₹5,000 typically)

Registration: Not compulsory, but highly recommended!

Benefits of Registration:

• Can sue third parties
• Can sue partners
• Legal recognition

Quiz

💡 Final Wisdom: "Partnership without deed is like marriage without understanding – legally valid, but disaster waiting to happen!"