What does a partnership deed record?
A partnership deed records who the partners are, what business they carry on, what capital each brings, and how they share profits. The firm can exist without that writing. Where the deed, or an oral agreement, is silent, the Partnership Act fills the gap: profits are shared equally, and a partner is not paid interest on capital or a salary.
What does the deed record?
The usual record is the name and place of the business, the names of the partners, the capital each subscribes, the profit-sharing ratio, whether any partner is paid a salary or interest on capital, how a partner may draw, how a new partner is admitted, and how the firm ends. It can also say who may bind the firm, how the books are kept, and how a dispute is referred. This page does not set out a blank deed. Stamp on the instrument is a state charge, and the rate is not set here.
Registering the firm with the Registrar of Firms is a separate step from writing the deed. What an unregistered firm cannot sue for is on the registration page. How the firm is registered is on the partnership page.
What applies if the deed is silent?
| Matter | What the Act applies |
|---|---|
| Profits and losses | Shared equally |
| Interest on capital | None |
| Remuneration | None |
| A partner’s advance beyond the agreed capital | 6 percent a year |
Those defaults apply only where the contract does not provide otherwise. A deed that sets a different ratio, or a salary, replaces them for that point.
What does the deed not create?
The partners remain jointly and severally liable for the acts of the firm. The deed cannot give them the limited liability of a limited liability partnership. That registration is a different Act, on the LLP page. A minor cannot be a partner. A minor may be admitted to the benefits of the partnership, and the minor’s position is then section 30, not a clause that makes the minor a full partner.
Frequently asked questions
Four questions cover an oral agreement, interest on capital, a partner’s loan, and limited liability.
Must the agreement be in writing?
No. A partnership can be formed orally. A written deed is the record the partners can rely on when they disagree. It is not what creates the firm.
Is interest on capital automatic?
No. Interest on capital is paid only if the deed says so. If the deed is silent, none is paid.
What interest does a partner’s loan carry?
If the deed is silent, section 13 allows 6 percent a year on money advanced by a partner beyond the capital he agreed to subscribe.
Does the deed limit the partners’ liability?
No. Partners of a firm are jointly and severally liable for the firm’s acts. A clause in the deed does not make them a limited liability partnership. That is a different statute and a different registration.
Sources
A partnership is section 4 of the Indian Partnership Act, 1932. The mutual rights that apply when the agreement is silent are section 13.