What is Partnership Deed and What are its Main Contents?. A partnership comes into existence by agreement between the persons who want to share the profit of the business. Such an agreement may be implied by the conduct of the partners or may be express (Oral or written). In order to avoid future dispute, it is advisable to have a written agreement. The document containing the agreement between partners is called ‘Partnership deed’. The document containing the agreement between the partners is called ‘Partnership Deed’. The deed must be properly stamped and signed by all the partners except a minor who has be admitted in the benefits of partnership.
It is better if the deed is very elaborate and clear about all possible questions which may rise in the course of partnership. In the absence of any agreement in relation to any point not incorporated therein, the provisions of the Partnership Act will apply and will determine their rights and duties.
The Partnership deed is not a public document like the Memorandum of Association of a Company.
Main Content of Partnership Deed
Some of the important clauses to be included in a partnership deed are as follows:
1. Name of the firm and Its Address : The deed should contain of the firm and place of its business.
2. Name and Address of Partners : The deed should also contains the names and address of all partners.
3. Nature of Firm’s Business : The nature of business proposed to be carried and its limitation should be included in it.
4. Duration of Partnership : It the partnership is established for a fixed duration or for a fixed work, it should be stated in it.
5. Partners’ Capitals : The deed should contain the total amount of capital and contributions by each partner.
6. Interest on Capital : If the partners decide to change interest on their capitals, the rate should be mentioned in the deed.
7. Drawing and Interest on Them : The deed should contain the limit of drawings by every partner and the rate of interest to be charged.
8. Division of Profit : Profit and loss sharing ratio should be stated in the deed. If it is not mentioned partners are authorized to share equally according to Partnership Act.
9. Partners’ Salary and Commission : If the partners decide to pay salary and commission to the partners, the deed should contain the amount of salary or commission payable to any partner for the services rendered to the business.
10. Rights and Duties of Partners : If any partner has some special rights and duties regarding to conducts of business or if the liability of any partner is limited to the capital invested by him, these facts should also be mentioned in it.
11. Admission and Retirement of Partners : After the establishment of partnership some new partners may be admitted and some may retire from the business. If any definite procedure is to be adopted at the time of admission or retirement of partner, it should be stated in it.
12. Death of a Partner : The procedure of calculating the amount due to a deceased partner and the method of its payment to his successors, should also be decided and stated in the deed.
13. Valuation of Goodwill : The method of valuation of goodwill at the time of admission, retirement or death of a partner should be also be clearly stated in it.
14. Revaluation of Assets and Liabilities : The method of revaluation of assets and liabilities on admission, retirement or death of a partner should also be clearly stated in it.
15. Accounts and Audit : The procedure of keeping accounts and their audit should also be stated in it.
16. Dissolution of Partnership : The deed should contain the firm and the method of the final settlement of accounts.
17. Arbitration Clause : In case of disputes the method of appointing arbitrators and their rights should be clearly mentioned.
Rights & Duties of Partners:
Rights of Partners
1. Right to Take Part in Management : Every partner has the right to take active part in the management and operation of the business of the firm.
2. Right to Express Opinion : Every partner has right to express his views and give advice to other partners for the benefits of business. These opinion and advises may be accepted or rejected by the other partners. However, no major business decisions can be taken without the unanimous will of all the partners.
3. Right to Inspect and Take Copies of Accounts : Every partner has right to inspect the books of accounts of the firm. They can also obtain copies of account.
4. Right to Share Profit : Every partner right to share the profit of business. They can share the profit equally or in the agreed ratio.
5. Right to have Interest : Partners cannot demand any interest on their capital investment. But they have right to get up to 10% interest on loans and advances made by them to the partnership firm.
6. Right to be Indemnified : Every partner is entitled to get compensation from the partnership firm is respect of liabilities incurred and payment made by him. He should also be compensated for the losses caused by other partners.
7. Right to Property : Every partner has right to use the property of the partnership firm for the benefit of the firm. They should not use the business property for their personal purposes.
8. Right to Leave the Firm : Every partner has right to leave the firm with the consent of other partners.
9. Right to Ownership : Every partner has right on the property of the firm. Thus, property of the firm cannot be sold by one partner without the consent of other partners.
10. Right to Dissolve : A partner has the right to dissolve the partnership with the consent of all partners. Even, if other partners refuse then also he can dissolve the partnership by informing other partners.
Duties of Partners
1. To share Losses : In case of loss, it is the duty if every partner to bear the loss equally or in the profit sharing ratio.
2. To Work Faithfully : Partnership is based on mutual trust and confidence of the partners. It is the duty of every partner to be honest and loyal to other partners as well as to the firm.
3. To Compensate : It is the duty of every partner to compensate the losses or damage to the firm or to others due to his negligence or deliberate misconduct.
4. To Work Without Remuneration : Partnership is operated either by all partners or by any of them acting for all. It is the duty of every partner to work in the firm without charging and expecting remuneration. However, the partner can demand remuneration if it is mentioned in the agreement.
5. To Act Within Authority : It is the duty of every partner to act within the scope of the authority entrusted to him.
6. To Maintain Current Account : It is the duty of every partner to maintain proper and correct books of accounts, so that they may give true and fair view of the business.
7. Not to Run Competitive Business : A partner should not make any secret profit by way of commission from the partnership business. Similarly, the property of the firm including goodwill should not be used for personal purposes.
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