What is Partnership Deed? According to the Partnership Act, the Partnership Deed is necessary for the formation of the partnership. This partnership deed may be written, oral or implied, but a written agreement is better than oral or implied agreement. This partnership deed contains all the terms and conditions regarding management and organization of the firm. It is better than it must be written, signed by all the partners and must be registered with the registrar of the firm. When during the running business a dispute arises among the partners, it is partnership agreement which provides guidance for the removal of such disputes and misunderstanding. This partnership agreement may also be called partnership deed” or “Articles of Partnership”.
MAIN FEATURES OF PARTNERSHIP DEED
The main features of this partnership deed may be as follows:
- NAME OF PARTNERSHIP
The partnership agreement contains the name by which the firm will start its business. This name should not have been already registered with the registrar of partnership firm.
- NAME OF THE PARTNERS
The name of the partners and their addresses are also given in the partnership deed;
- NATURE OF THE BUSINESS
It is also provided in the partnership deed that what type of business will be done by the firm.
- LOCATION OF THE BUSINESS
The partnership Agreement should provide information about the places where the head office and of partnership business will be opened.
- COMMENCEMENT OF BUSINESS
The date and place where the business of the firm will be started first, are also provided in the deed.
- DURATION OF THE BUSINESS
It is also explained in the partnership deed whether the business of the firm will be for a fixed period of time or it will be for an indefinite period or it will continue until the completion of the venture.
- MANAGEMENT OF THE FIRM
It is stated in the deed whether all the partners will take an active part in the management of the firm or anyone will work on behalf of all the partners.
- AMOUNT OF CAPITAL
Total amount of capital and its contribution from the partners is also provided for in the partnership deed.
- AMOUNT OF DRAWINGS
It is also provided that any partner will be allowed to draw any amount from the firm for his personal use.
- PROFIT SHARING RATIO
The profit sharing ratio is also given in the partnership deed in order to share future profit.
- INTEREST ON CAPITAL AND DRAWINGS
It is also provided whether interest on capital and drawings will be allowed or not and if allowed then will be the annual rate.
- SALARY TO PARTNERS
Whether any salary is allowed to any partner for the management of the firm or not. If allowed then what will be its amount.
- PREPARATION OF FINAL ACCOUNT
The date and the period after which the of the firms will be prepared are also given in the partnership deed. This period may be these months, many months or a full year.
- ADDITIONAL FUNDS
If the firm needs more funds for the business than its paid-up capital, how these funds will be provided for, whether from borrowing Outsides or from the partners, is also provided in the deed,
- AUDIT OF ACCOUNTS
The rules regarding the internal and external audit are also Provided in the partnership deed,
- BANK ACCOUNT
It is also stated whether joint Bank account will be opened or only one partner is authorized to open a bank account and sign on its cheques.
- ADMISSION AND WITHDRAWAL OF PARTNERS
The rules regarding the admission and withdrawal of partners from the firm are also provided in the partnership deed.
- VALUATION OF GOODWILL
The provisions regarding the of the firm during the admission and withdrawal are also given.
- RIGHTS AND DUTIES OF PARTNERS
The provisions regarding the general rights and duties of the partners are also given in the partnership deed.