What is a partnership deed? Clear about Partners types Lesson-3

Partnership deed agreement

A Partnership deed is a document that is signed by all the partners and which contains all the methods determining and governing the mutual rights duties and liabilities of the partners in the conduct and management of the affairs of the partnership.

in case you have not read about the Proprietorship or partnership business so you can read our last article to understand this article quickly.

Important contents of the partnership deed

• Name and location of the business
• The nature of business
• The amount of capital to be contributed by each partner
• Provisions requirements of Re-investment in business
• The duties powers and obligations of all the partners
• Length of life of the business
• The method of distribution of profit and sharing of the loss
• Method of admitting a new partner
• Procedure for withdrawal of a partner
• The method of valuation of goodwill on admission or retirement or death of a partner
• The method of revaluation of assets or liabilities on admission or retirement or death of a partner
• Procedure to be followed for the expulsion of a partner
• Agreement to be followed in case of partner becomes insolvent
• Salary if any payable to the partner for managing the firm
• The method of preparing accounts and arrangements for audit
• Procedure for the Dissolution of the firm and settlement of accounts
• Arbitration in case of disputes among partners
• Operation of bank account

So above mention is the main clauses that should be written on the partnership deed to avoid any misconceptions in the future.

Now we will read about the types of partners which can be formed in the partnership business.

Types of partners

1. General partners
2. Special partners
3. Other partners

What are general partners?

Basically, all the partners of a firm are general partners .whose liability is unlimited in the firm is called general partner .there are two types of general partners.

• Active partner
• Sleeping partner

Active partner

A partner who takes part in the day-to-day management of the business is called an active partner.

Sleeping partner

A partner who contributes capital share profit loss of the firm but takes no part in the firm’s activities is called a sleeping partner.

Special Partners

Special partners are partners whose liability is limited to the extent of their capital contributed to the firm they cannot take part in the management of the firm.

Other Partners

Secret Partner: He is an active partner but is not known to the public as a partner

Nominal Partner: He lends his name for the goodwill and credit worthiness to the firm, he neither contributes capital nor takes an active part in the management of the business.

Partners at will

Partners in profit only

So now our article is complete and now you understand which partner to select before starting the partnership business, now in the next lesson, we will discuss the registration process and other requirements, etc.