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Who put in what, how profits split, and what happens if someone walks away — written down while it's still a handshake.
Partnership Deed
The written constitution of a general partnership under the Indian Partnership Act, 1932 — and the reason to have one is the Act itself: without a deed, partners share profits equally REGARDLESS of who contributed what capital (Section 13(b)), no partner earns interest on capital (Section 13(c)), and no partner is paid for running the business (Section 13(a)). The deed exists to replace those defaults with what the partners actually agreed: the firm's name, business and principal place; every partner's capital and profit share in one Schedule of Partners that totals its own percentages as a self-check; banking, books and the accounting year; drawings; an optional working partner's remuneration expressly authorised by the deed; what happens when a partner joins, retires, dies or becomes insolvent (the firm continues, dues settled on accounts to the date); and dissolution with the Section 48 winding-up order. Two partners are the named roles; a third or fourth joins through additional parties — preamble recital, schedule row, and signature block, no new roles needed. E-sign eligible: a partnership deed is not on the IT Act First Schedule exclusion list. The boundary matters: this creates an UNLIMITED-liability general partnership in which every partner is personally liable for the firm's debts and each partner's acts in the ordinary course bind the others. It is not an LLP (Limited Liability Partnership Act 2008) and not a company founders' or shareholders' agreement — the catalogue has no type for those yet, and this deed must not be dressed up as one. Someone who works in the business for pay without sharing profits and losses as an owner is staff, not a partner — use the Employment Agreement; an outside collaborator paid per project, with no mutual agency, is a Service Agreement engagement.
What makes it hold
What this document contains
12 clauses every partnership deed carries, plus 2 you can add.
- 01
Introduction
The preamble: date and place, the First and Second Partner with the recital wording their entityType selects, any further partners through additionalParties, and recitals stating that the Parties have agreed to carry on business in partnership and wish to record its terms in writing.
- 02
Firm Name and Business
Names the Firm (the defined term the rest of the Deed uses), states the nature of its business, and fixes the principal place of business, with optional additional places.
- 03
Commencement and Duration
When the partnership commenced (or commences), and how long it runs: at will — continuing until dissolved — or for a fixed term ending on a stated date, with the Section 17(b) consequence stated for a business continued past the term.
- 04
Capital and Contributions
The Schedule of Partners — one row per partner naming their capital contribution and profit share percent, with the shares totalled beside the schedule as a self-check. Further capital by mutual written consent; no withdrawal of capital without the consent of all; interest on capital optional and off by default.
- 05
Profit and Loss
Profits and losses divided in the proportions stated in the Schedule of Partners — expressly in place of the equal division Section 13(b) of the 1932 Act would otherwise imply, which is the single provision the deed most exists to displace. Losses in the same proportions, except loss caused by a partner's fraud or wilful neglect, which that partner makes good.
- 06
Banking and Accounts
The Firm's bank account and who operates it (jointly by default, any partner singly, or a named partner), books of account kept at the principal place of business and open to every partner, the accounting year, and annual accounts signed by all partners and binding subject to a six-month window for manifest error.
- 07
Drawings
Whether and how partners draw money against their profit share month to month: an optional stated monthly allowance (leave it unset and drawings need mutual written agreement), every drawing debited to the drawing partner's account, and any excess over the year's actual share made good on the annual settlement.
- 08
Duties of Partners and Consent Matters
The mutual duties every partnership rests on — good faith, true accounts, full information, indemnity for fraud or wilful neglect — and the list of acts no partner may do without the prior written consent of all the others: lending the Firm's money, guarantees in the Firm's name, compromising claims, transferring a share, admitting liability, competing with the Firm, and contracts outside the ordinary course. The consent list binds the partners between themselves; it does not by itself limit the Firm's liability to outsiders under the Act's mutual-agency rule.
- 09
Admission, Retirement and Death
The coming and going of partners: admission only with the written consent of all (the Section 31 position stated as the parties' own term), retirement on written notice without dissolving the Firm for the rest, the retiring partner's dues — capital, undrawn profits and advances per accounts to the date — paid within a stated period, and death or insolvency continuing the Firm for the remaining partners (displacing Section 42(c)) with the same settlement to the legal representatives. Where only one partner would remain, the Firm instead stands dissolved — two people are the minimum a partnership can be.
- 10
Dissolution and Winding Up
How the Firm ends: by the written consent of all partners at any time; by notice (for a partnership at will) or on expiry of the term (for a fixed term); and the winding-up order — assets realised including goodwill, third-party debts first, then partner advances, then capital, residue in profit-sharing proportions, with deficiencies made good in the Section 48 order.
- 11
Governing Law and Dispute Resolution
Applicable law, jurisdiction, and dispute resolution mechanism (courts or arbitration under Indian law).
- 12
General Provisions
The closing machinery: entire agreement, amendments only in writing signed by all partners, registration of the Firm with the Registrar of Firms (on by default; the description carries the Section 69 reason), notices, severability, counterparts, and the stamp duty on the Deed borne by the Firm.
Optional clauses
Working Partner's Remuneration
One partner runs the business day to day and is paid for it, in addition to a profit share: a named working partner, whole-time attention, a stated monthly remuneration debited as an expense of the Firm, and the Deed's express authorisation of it — the authorisation the income-tax framework looks for. Revisable only by the written consent of all partners. Without this clause, no partner is entitled to remuneration (Section 13(a), Indian Partnership Act 1932).
Worth adding when: One partner will run the business day to day — keeping the shop, managing the site, handling clients — and is to be paid remuneration for that work in addition to a profit share
Custom Clause
A free-form clause for bespoke provisions not covered by standard clauses. Use clauseId 'custom-clause-1', 'custom-clause-2', etc. to add multiple.
What the law requires
- The defaults the deed exists to displace
- In the absence of contrary agreement, the Indian Partnership Act 1932 entitles every partner to an EQUAL share of profits regardless of capital contributed, allows no interest on capital, and pays no partner remuneration for conducting the business (Section 13). A deed that is silent on any of these points leaves the default standing. Always carry the agreed profit shares into the Schedule of Partners, and state the interest and remuneration positions expressly — including stating that they are excluded, when they are.
- Section 13(a)–(d), Indian Partnership Act 1932
- Registration, and what an unregistered firm cannot do
- Registration with the Registrar of Firms is optional in form but load-bearing in effect: an unregistered firm cannot sue a third party to enforce a contractual right, and a partner of an unregistered firm cannot sue the firm or co-partners to enforce a right arising from this deed. The deed undertakes registration by default; if the partners strike that undertaking, they should do so knowing Section 69 is what they are keeping.
- Sections 58–59 and 69, Indian Partnership Act 1932
- The income-tax frame for remuneration and interest — guidance, never a conclusion
- The firm's deduction for a working partner's remuneration is available only where the deed authorises it and only within the Section 40(b) slab computed on book profit; interest on capital is deductible only up to 12% per annum and only where the deed authorises it; and both require the firm to be assessed as a firm under Section 184 (which itself requires a deed with specified shares). Keep the deed's authorisations explicit and quantified. Never state a tax conclusion in the document's prose — the deed records what the partners agreed; deductibility is guidance for the drafter.
- Sections 40(b) and 184, Income-tax Act 1961
- Unlimited liability and mutual agency — what the consent list does not do
- Every partner is an agent of the firm for the purposes of its business, and the act of a partner in the ordinary course binds the firm; every partner is personally liable, jointly and severally, for the firm's obligations. The deed's consent-matters list allocates responsibility BETWEEN the partners; it does not by itself cut down the firm's liability to an outsider who had no notice of the restriction. Never present this deed as limiting liability — a client who needs limited liability needs an LLP or a company, which this catalogue does not yet cover.
- Sections 18–19, 22 and 25, Indian Partnership Act 1932
- Duration, and how each kind of partnership ends
- A partnership at will dissolves on a partner giving notice of intention to dissolve; a fixed-term partnership dissolves on expiry of the term, and if the business is continued past the term without a new deed, it becomes a partnership at will on the old terms so far as consistent. The deed states both consequences in the branch that applies, and adds the honest edge case statute leaves implicit: where only one partner would remain, there is nothing to continue — the firm dissolves.
- Sections 7, 17(b), 42 and 43, Indian Partnership Act 1932