A partnership agreement contains the terms and conditions relating to partnership and the rules and regulations governing its management. It may be oral or in wiring. When the partners enter into a written agreement on a stamped paper, the document so produced is known as ‘Deed of Partnership’. A partnership deed embodies the rights and duties of the partners and also contains provisions relating to the management of partnership business. financial arrangement, settlement of accounts at the dissolution of the firm and so on. These terms and conditions are also known as articles of partnership.

A partnership deed should contain provisions relating to the following points:

1.    Names and Address. The names and the address of the partnership firm and its partners should be property recorded in the partnership deed. The firms name may be after the names of partners or it may be an imaginary name. But the firm’s name should not contain such words as Crown, Empress, Empire, Imperial, King, Queen, Royal which imply the sanction, approval or patronage of the Government.

2.    Nature and Duration of Business. The partnership deed should contain the mains subsidiary objectives for which the firm is started. If the period of partnership is fixed, it should also be started in the deed.

3.    Capital. The capital contributed by each partner into the partnership business should be written in the partnership deed.

4.    Profit and Loss Sharing Ratio. The profit and loss sharing ratio between the partners should be clearly stated. In case, a partner is entitled to profits only and is not liable to share the losses this fact should also be recorded.

5.    Drawings. The amount which could be withdrawn by each partner should also be written to avoid disputes in the future.

6.    Interest on Capital. Partners may agree to receive interest at a specific rate on their capital investment. Similarly, they will be liable to pay interest on their drawings. This fact should also be stated clearly.

7.    Salary or Commission. The partnership agreement can provide specifically about the amount of salary, commission or any type of remuneration to be paid to a particular partner or to all.

8.    Division of Work. The partners can write in their agreement about the activities to be performed by each of them.

9.    Maintenance of Accounts. The partners can mention the system of maintaining the accounts of the firm.

10.    Goodwill of the Firm. Often the disputed are found among the partners about the valuation of the goodwill of the firm at the time of admission, retirement or death or even at the time of dissolving the firm. They should fix the formula or the basis for the computation of goodwill of the firm, so that the future disputes are avoided.

11.    Operation of Bank Account. Since every partner is entitled to act as an agent of the firm, he may claim to exercise his right of operation of bank account. However, they can specifically delegate their power to operate bank account to one or more partners and the norms of the operation of accounts can also be laid down by them.

12.    Arbitration Clause. If at any time, any dispute arises between the partners, they can refer the matter to some arbitrator instead of going to the court of law. In courts, not only time and money are wasted, but the reputation of the firm is also endangered.

13.    Miscellaneous Provisions. The partnership deed may also provide for other matters such as revaluation of asset, dissolution of partnership, loans, from partners, etc.

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