5 Importance of Partnership Deed

Partnership requires mutual trust, confidence and understanding among all the partners. An agreement that contains every aspects and terms that the partners agreed upon before commencing the partnership firm is termed as partnership deed. A partnership deed can either be oral or written. Both the forms of the partnership deed are equally valid in the eyes of law. However, it is always advisable and preferable to have a written agreement in order to avoid any future conflicts and disputes among the partners. The partnership agreement in the written form is termed as Partnership Deed. Thus, a partnership deed can be defined as a document containing the details about the partners and agreement among all the partners of a partnership firm. It includes agreement on profit sharing ratio, salaries, commission of partners, interest on partner’s capital and drawings, interest on loan given or taken by the partners, etc. Following are the Importance of Partnership Deed

Importance of Partnership Deed

  1. A partnership deed is a written partnership agreement among the partners of a partnership firm. Although, the law does not make it compulsory to have a written partnership agreement but it is always preferred to have a agreement in writing due to the following reasons.
  2. It provides information regarding rights, duties and obligations of each of the partners
  3. It helps in avoiding the misunderstanding and disagreements among the partners on any issue. This is because a deed contains all the terms and conditions accepted by the partnership at the inception of the partnership, which can be referred to as and when needed.
  4. It acts as an evidence in the court of law.
  5. It serves as basis for the formation of a partnership.

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