A partnership deed is very important for the solution of problems and conflicts of the partnership firm. All relevant matters should be in the deed to be able to solve future problems. If anything is not mentioned, then the relevant provision of Partnership Act, 1932 will be applicable. The partnership deed should contain the following points:
- Name and Address of the Firm.
- Names and Addresses of the Partners.
- Nature of Business: It should be unanimously decided by the partners what type of business they will be carrying on. A partnership is contractual in nature. As the definition states a partnership is an association of two or more persons. A partnership does not occur from the process of law. Neither can it be hereditary. It has to be a intentional agreement between partners.
- Percentage of ownership: You should have a record of how much each partner is contributing to the partnership prior to its opening.
- Profit Sharing Ratio: Partners must agree as to the ratio in which they will be distributing profit or loss. You must settle-on if the profits and losses will be allocated in proportion to a partner’s ownership interest, which is the method it is handled unless otherwise indicated. But one partner cannot be entitled to the entire profits of the firm.
- Capitals of the Partners: The amount of capital to be contributed by each partner and whether the capital accounts will be fluctuating or fixed.
- Interest on Capital: Whether interest on capital is allowed or not. If allowed then at what rate.
- The death of a partner: What happens if one partner dies or wants to leave the partnership? To manage these situations you need a buy/sell agreement.
- Amount of Drawings: How much amount each partner can withdraw for his personal use.
- Interest on Drawings: Whether interest on drawings will be charged or not. If it will be charged then the rate of interest.
- Salary: Whether salary or commission will be paid to partners for their services or not if it will be paid then the amount of it. Your agreement requirements to describe how much each partner will be paid for their efforts.
- A loan from Partners: The loan taken by a firm from partners and interest payable on it.
- Bank Accounts: The bank where accounts are to be opened, the names of partners empowered to make withdrawals and sign the cheques.
- Books of Accounts: The method of bookkeeping and accounts, the date on which final accounts of the firm will be prepared.
- Date of Commencement of Partnership.
- Duration of Partnership: The period for which the partnership has been established and the mode of dissolution of partnership.
- Rules to be followed in case of Admission of a Partner.
- Rules of Retirement: The notice period for retirement and the method to determine the amount of a retired or deceased partner and the method of payment.
- Goodwill: The methods of valuation of goodwill at the time of admission and retirement of a partner. How will you distribute the profits and losses of your company? This will also associate with other aspects of your contract, such as the percentages of ownership and the workload of each partner.
- Audit of Accounts: Whether the firm’s books will be audited or not. If so, the mode of auditor’s appointment.
- Application of Garner Vs Murray Decision: Whether on the insolvency of a partner, the firm will carry on business or not and whether the Gamer Vs Murray decision will be applicable or not.
- Settlement of Disputes: The methods for settlement of disputes. Whether arbitrator. Your agreement should describe how you arrangement to solve disputes and what accomplishment should be taken if you cannot come to an agreement or cooperation.
