What should partners agree before they sign a deed?
Partners should agree, before they start, who puts in money or work, how profits and losses are shared, whether any partner is paid, and how a partner can leave. Those points belong in the deed. Liking the person is not a term the Act can enforce.
What belongs in the agreement?
The deed names the partners, the business, the capital each one brings, the profit share, any salary, and the way a partner retires or a new partner is admitted. Which clauses to write is on the deed page. A firm is registered with the Registrar of Firms of the state if the partners choose to register it. That registrar is not the Registrar of Companies.
What applies if the deed is silent?
Profits are shared equally. No partner is entitled to remuneration. Ordinary matters are decided by a majority, and a change in the nature of the business needs all the partners. Those default rules are on the rights page. They are the reason the deed should not stay silent on pay and on exit.
What does a partner not get?
A partner in a firm does not get limited liability. Creditors of the firm can look to the partners. An LLP or a company is a different registration. Choosing a co-founder does not, by itself, create either of them. How a partner leaves a firm that already exists is on the retirement page.
Frequently asked questions
Four questions cover a verbal firm, equal profits, limited liability, and retirement.
Does a handshake replace the deed?
No. A firm can exist without a written deed, but the Act then fills the gaps. The written deed is what the partners can rely on when they disagree.
Are profits equal unless the deed says otherwise?
Yes. Where the deed is silent, partners share profits equally, and they do not take remuneration.
Does the partnership limit liability?
No. Partners in a firm are liable for the firm’s debts. Limited liability is the point of an LLP or a company, which are registered separately.
Can one partner retire by a private note?
Only if the deed allows it, or all the partners agree, or the firm is at will and written notice is given. Public notice is still required so the retiring partner is not held out as a partner afterwards.
Sources
What a deed should record is on the deed page. The rights that apply when the deed is silent are sections 12 and 13 of the Partnership Act, 1932.