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Tue, Jul 01 2025
Shubham Bansal
A Partnership Deed is a legal document that outlines the rights, responsibilities, profit-sharing ratios, and other essential terms between partners involved in a business partnership. It acts as the foundation of a partnership business, ensuring clarity and preventing future disputes.
A Partnership Deed, also known as a Partnership Agreement, is a written contract between two or more individuals who agree to run a business together and share profits and losses according to the agreed terms. Though not mandatory under the Indian Partnership Act, 1932, having a written deed helps maintain transparency and legal clarity.
Avoids Disputes: Clearly defines each partner's roles and responsibilities.
Legal Validity: Acts as legal evidence in case of conflicts.
Profit & Loss Sharing: Explains how profits and losses will be divided.
Decision-Making: Provides rules for decision-making and operational procedures.
Business Continuity: Contains clauses about admission, retirement, or death of a partner.
A well-drafted Partnership Deed usually includes the following key clauses:
1. Name and Address of the Firm
Clearly mention the name of the partnership firm and its registered business address.
2. Details of Partners
Full names, addresses, and roles of each partner.
3. Nature of Business
Define the type of business the firm will undertake.
4. Capital Contribution
Specify each partner’s initial capital contribution.
5. Profit and Loss Sharing Ratio
Define how profits and losses will be distributed among partners.
6. Interest on Capital and Drawings
Details of any interest payable on capital invested or drawings made.
7. Management and Decision-Making Powers
Who will manage the day-to-day operations and how decisions will be made.
8. Bank Operations
Authorization for operating bank accounts.
9. Admission or Retirement of Partners
Procedure for adding or removing partners.
10. Dissolution of Partnership
Rules for dissolving the partnership firm.
No, partnership registration is not mandatory in India. However, a registered partnership firm enjoys legal benefits, including the right to sue third parties and partners for enforcement of rights under the partnership agreement.
Draft the partnership deed on stamp paper.
Get it signed by all partners.
Notarize the deed.
Submit the deed along with the registration form to the Registrar of Firms.
Pay the required registration fee.
A Partnership Deed is crucial for any partnership firm to ensure smooth business operations, clarity, and legal protection. Whether you’re starting a small business or a large partnership firm, drafting a comprehensive Partnership Deed should be your first step.
Q1. Can a partnership firm operate without a partnership deed?
Q2. Can a partnership deed be modified later?
Q3. Is registration of partnership deed compulsory?