Content of Partnership Deed

The following clauses are normally covered in the partnership deed:

i. Name of the firm

ii. Names, addresses, qualifications and occupations of partners.

iii. Nature and Scope of Business proposed to be carried on by the firm.

iv. Objects of the firm. (The word “Objects” is used to mean objectives or purpose.)

v. Duration of Partnership, if any.

vi. The place where business is proposed to be carried on.

vii. Amount of capital to be contributed by each partner.

viii. Amount that can be withdrawn by a partner from the business.

ix. The rate of interest that shall be payable to partners on their capital.

x. The extent to which each of the partner would be involved in the day to day management of the business

xi. The rate of interest that shall be charged to partners on withdrawal of capital from the business.

xii. The ratio in which partners shall share the profits or losses.

xiii. The amount of salary or commission payable to any partner for any services rendered to the firm.

xiv. Allocation of responsibilities of business amongst various partners.

xv. Maintenance of Books of Account of partnership firm

xvi. Process for audit and Inspection of Accounting books by a partner.

xvii. Matters pertaining to admission or retirement of a partner.

xviii. The method of valuation of Goodwill at the time of admission / retirement of partners.

xix. The method of revaluation of assets and liabilities on admission retirement or death of a partner.

xx. Loans and Advances given to the firm by the partners and the rate of interest that shall be payable.

xxi. Procedure of Dissolution of the firm and mode of settlement of accounts after dissolution.

xxii. Arbitration clause for settlement of disputes, if any, between partners.

xxiii. The conditions for expulsion of a partner and procedure for expulsion.

xxiv. Arrangement in case of insolvency of a partner.

xxv. The rights, duties and obligations of partners.

xxvi. Operation of Bank Accounts and authority for signing Cheques and other documents.

xxvii. Any other clause or clauses that may be desired by the partners to be included in the Deed.

Rights, Duties and Liabilities of a Partner:

The Partnership Deed contains details of rights, duties and liabilities of a Partner. If there is no partnership deed, or the deed is silent on any aspect, the provisions of Partnership Act come into force.

Generally, the rights, duties and obligations of a partner are as under:

Rights of a Partner:

i. To take part in management of business of the firm.

ii. To express his opinion on any matter concerning the firm.

iii. To vote on any issue requiring consent of atleast a majority of partners

iv. To access, inspect and maintain a copy of books of account of the firm.

v. To share profits of the firm as per agreement.

vi. To receive interest on loans advanced by the partner to the firm. If rate of interest is not fixed, it is calculated @ 6% p.a.

vii. To receive any amount spent by him/her in the proper conduct of business of the firm.

viii. To be indemnified for any loss incurred in the conduct of business of the firm.

ix. To remain as partner of the firm, unless expelled from partnership as per the Partnership Deed. For example, a partner cannot be expelled from the partnership simply by majority vote of other partners.

x. To retire from the partnership as per the norms agreed upon.

xi. To have the property of the firm used exclusively for the purpose of the firm.

xii. To accept or reject the admission of a new partner.

xiii. To be a joint owner of all the assets of the firm.

xiv. To issue a notice for dissolution of the firm.

xv. To carry on a business competing with the business of the firm, on retirement.

xvi. To share profits, or earn interest @ 6% p.a., on amount due to partner on retirement, until the payment is made in full.

xvii. To do all or any act necessary to protect the firm from loss in case of an emergency.

Duties of a Partner:

i. To be just and faithful to the firm and the other partners.

ii. To provide full and correct information and true accounts of the firm to each other.

iii. To carry on business of the firm to the maximum advantage of the firm and all the partners.

iv. To share profits and losses of the firm as per agreed terms.

v. To try and protect the firm from loss to the best of his ability.

vi. To indemnify the firm against any loss caused by his gross negligence, breach of conduct or willful misconduct in the ordinary course of business.

vii. Not to carry on any business that competes with that of the firm in any manner.

viii. To handover any profit made from a business in competition with business of the firm, to the firm.

ix. Not to use any of the assets of the firm for his personal use or for use in a business other than the business of the firm.

x. To act within the scope of his authority.

xi. Not to transfer or assign his interest in the partnership to another person without the consent of other partners.

xii. Not to earn any secret profit by way of commission on sales or purchase etc., on any dealings done on behalf of the firm.

Liabilities of a Partner:

i. All Partners are jointly and severally liable for all acts of the firm. If the assets of the firm are not sufficient to satisfy the claims of outsiders, such claims can be recovered from the personal assets of any one, some or all partners.

ii. A partner is liable to make good any loss caused to the firm due to his negligence or misconduct in the ordinary course of business.

iii. A partner is liable for any act of the other partners acting within the scope of his authority.

iv. A partner is liable for any profit made on account of dealing on behalf of the firm, to the firm.

v. A Partner is liable for any profit made by a business, competing with the business of the firm, to the firm.

vi. A partner is liable for any profit made by putting the assets of the firm to personal use.

vii. A partner is also liable to any third party for any wrongful act done by such partner, or any other partner of the firm.

viii. A partner is liable for misuse of money of third parties received by the partner.

ix. A retiring partner is also held liable for all such acts of the firm contracted before the term.

Download the Basic Partnership Format in word format from below link: