Partnership Deed in India: A Complete Guide for Business Owners

What Is a Partnership Deed?

A partnership deed is a legal agreement between two or more persons who agree to carry on a business together with the intent to share profits and losses. In India, partnerships are governed by the Indian Partnership Act, 1932.

Registered vs. Unregistered Partnership

While registration is not mandatory, an unregistered firm cannot:

• Sue a third party to enforce a contract
• Claim a set-off in legal proceedings

Strongly recommend registering your partnership with the Registrar of Firms in your state.

Key Clauses in a Partnership Deed

1. Name and Nature of Business

The firm name and the primary business activity. Note: You cannot use "Private Limited" or "LLP" in a partnership firm's name.

2. Capital Contribution

Each partner's capital contribution — whether cash, property, or skills — and their ownership percentage.

3. Profit and Loss Sharing Ratio

The most important clause. Define the exact ratio. If not stated, the default under the Partnership Act is equal sharing.

4. Partner Roles and Responsibilities

Who manages day-to-day operations? Who has signing authority for bank accounts? Who handles client relationships?

5. Drawings and Salaries

Whether partners are entitled to a fixed salary (separate from profit share) and the maximum amount they can withdraw per month.

6. Decision-Making

Routine decisions: majority vote. Major decisions (e.g., taking loans, adding partners, buying property): unanimous consent.

7. Admission and Retirement of Partners

The procedure for bringing in new partners or allowing existing ones to retire — including how their share is valued and paid out.

8. Dissolution

Circumstances under which the firm can be dissolved: mutual consent, death of a partner, court order. Include the asset distribution procedure.

Partnership vs. LLP vs. Private Limited

Conclusion

Don't let a handshake agreement govern your business. Generate a comprehensive partnership deed on Kanoonseva and register your firm with confidence.