Partnership Deed

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on April 20, 2023

Partnership Deed: Definition

The document containing the terms and conditions of a partnership is known as a partnership deed.

In the absence of an agreement, the partnership act is applied. However, the act leaves it to the discretion of partners to resolve disputes.

In case disputes arise between the partners, therefore, a written agreement between the partners is usually helpful.

Important Points in a Partnership Deed

The following points are mentioned in a partnership deed:

  • Names of the partners
  • Capital contributed by each partner
  • The ratio of gain or loss
  • Salary to be paid to a partner for doing extra work
  • Maximum withdrawal of a partner during a particular period
  • Life of partnership business
  • Rate of interest on drawings (if any) to be charged
  • Interest on partner's loan
  • Financial period for determining the gain or loss of the business
  • Method of valuation of goodwill at the time of admission, the retirement of a partner, mergers, and dissolution
  • Method of calculating the amount due to a retiring partner or to the successors of a deceased partner
  • The procedure for paying the amount due to the retiring partner or executors of a deceased partner
  • Clauses regarding arbitration in the event of a dispute
  • Procedure for dissolution of the firm
  • Treatment of assurance policy (if any)

Rules in the Absence of Agreement

In the absence of a written agreement, the following rules are applicable in a partnership:

  • Each partner will contribute equally toward the capital of the firm
  • Gains and losses of the firm will be distributed equally among the partners
  • No salary will be paid to partners for performing duties in the firm
  • 6% interest on partners' loans other than their capital will be allowed
  • The firm will have to indemnify every partner for the expenses incurred or payments made by one on behalf of the firm
  • Without the consent of all the partners, no one can be admitted as a partner
  • Every partner has the right of access to the books of accounts
  • Every partner has the right to participate in the conduct and management of the business
  • A retiring partner or executor of a deceased partner has the right to a share in the profits, earned with the help of the assets that belong to them or interest at 6% per annum, at the option of such partner or their executors

Partnership Deed FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.