Partnership Agreement or partnership deed

Partnership Agreement or partnership deed

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Created By Admin Last Updated Wed, 30-Dec-2020

It is that agreement between two or more individuals who sign a contract to start a profitable business together. In the Partnership agreement, the partners are equally responsible for the debt of an organization. Even if one person withdraws his/her partnership, they are liable for an already existing debt and future liability if they do not provide proper notice of retirement.

Sometimes, a partnership can also exist without signing any scripted agreement, in such cases laws that regulate partnership would apply. The things that are highlighted on the partnership agreement are- type of business, the contribution of a fund by each partner, each partner’s right and responsibilities, percentage of ownership and profit and loss to be distributed amongst each other.

Importance of partnership agreement:

 A partnership the agreement also called a deed of partnership. A partnership agreement is vital to keep away the disagreement, confusion, or any changes that might occur in the course of business tenure. Some of the importance of a Partnership agreement is:

·         It forms distinguished roles and responsibilities for each partner.

·         To avoid tax-related problems, by having the tax status of the partnership spelled out, and to show that the partnership is distributing profits based on acceptable tax and accounting practices.

·         To avoid liability and legal issues, if there is any with any of the partners.

·         It helps to deal with any lifestyle or circumstances changes of any partners.

·         To surpass non-complete agreements and conflict of interest with partners.

·         To overrule the state law. Some states have required language in partnership agreements. But this language may not be the best for your particular partnership. If you don’t have a formal written agreement, you may find yourself having to abide by the default state laws.

·         To describe the circumstances under which new partners can enter the partnership.

Partnership in business:

In business, there are two types of partnership, they are-

General partnership

It is formed when two or more individual enters into an agreement to run a business and makes profits. Generally, no written agreements are made in this partnership but share all joint and various liabilities of the partner.

Limited partnership

The partner invests money but does not operate or involve themselves in operating a business. This partnership is formed legally and by creating the agreement.

Advantages of a partnership include:

·         Two heads (or more) are better than one.

·         Your business is easy to establish and start-up costs are low.

·         More capital is available for the business.

·         You will have greater borrowing capacity.


There should be a proper contract between the partners, which shall state all terms and conditions of a partnership firm. The partnership agreement is usually signed in the presence of all the partners and each of the partners would retain a signed original for his/her records. Once the document is signed by the partners, the document is witnessed and the signed partnership deed is held by each of the partners is duplicate or triplicate.