You have learnt that a partnership is formed by an agreement. This agreement may be oral or in writing. But, in order to avoid any dispute, with regard to the terms of partnership, it is considered desirable to have it in writing.
The document in which the terms of partnership as agreed by the partners are set forth, is called a ‘partnership deed’. It should be drafted with care and signed by all the partners. The partnership deed usually covers the following.
1. Name of the firm
2. Names and addresses of all partners
3. Nature and place of business
4. Date of commencement of partnership
5. Duration of partnership
6. Amount of capital contributed or to be contributed by each partner
7. Management of firm’s business
8. Ratio of sharing profits and losses
9. Interest, if any, on partners’ capital and drawings
10. Interest on loan advanced by a partner to the firm
11. Salaries, commission, etc., if payable to any partner
12. The safe custody of books and other documents
13. Mode of auditor’s appointment, if any
14. Rules to be followed in case of admission
15. Retirement, death, etc. of a partner
16. Method of settling disputes amongst partners
17. Settlement of accounts on dissolution of the firm
It should be noted that the terms laid down in the partnership deed may be varied by the consent of all the partners. But it should not contain any terms which are in contravention with the rules given in the Partnership Act.
