It is a written agreement that contains terms and conditions of partnership in a business operation. The agreement between partners can either oral or written.
But, it is always recommended to have a written agreement so as to avoid any kind of misunderstandings and unnecessary litigations in the future. So, if the agreement is in written form, it is called ‘Partnership Deed.’
It should be duly signed by the partners, stamped, and registered. Any modification in your agreement can be made with the mutual consent of all the partners.
Does your business has a partner. And you want to know what should be there in your deed of partnership. There are some important clauses that should be included in a deed of partnership:
- Name of the partners.
- Name and nature of the business.
- Capital contributed by each partner.
- The ratio of Gain or Loss.
- The rate of interest is allowed on a partner’s capital.
- for doing the extra job Salary is to be paid to a partner
- The maximum amount of withdrawal of a partner during a particular period.
- Whether a partner’s capitals are to be maintained on fixed or fluctuating methods.
- Life of partnership business.
- Rate of interest on the drawing if any to be charged.
- Interest on partner’s loan.
- Financial period for Determining Gain or Loss of the business.
- Method of valuation of goodwill at the time of admission, the retirement of a partner, mergers of business, and dissolution of a business.
- In the case of a retiring partner or to the successors of the deceased partner, method of computing the amount
- In the case of retiring partner or executors of the deceased, the method or procedure of payment of the amount
- The clause regarding arbitration in case of a dispute.
It controls and monitors the rights, responsibilities, and liabilities of all the partners. It avoids disputes between the partners and confusion on the profit and loss distribution ratio among the partners.
The responsibilities of an individual partner’s are mentioned clearly in a
deed of partnership. It also defines an emolument or salary of the partners and working partners. But, interest is paid to each partner who has invested capital in the business.