Types of Partnership Deed! A Complete Guide

A famous form of business entity that permits two or more people to come together and share their profits and losses are partnerships. In order to establish a partnership, the partners need to draft and execute a legal document known as a partnership deed. A partnership deed contains the details of the terms and conditions of the partnership. The rights, duties, rules and obligations of each partner are defined in the partnership deed in order to manage, operate and dissolve the partnership. In this blog, we will go through the different types of partnership deeds and their various characteristics.

Partnership Firm

Partnership firms are business entities in which two or more people decide to come together and share the profits and losses that they face as a company. In a partnership firm, each partner has to make contributions to the capital, skills, knowledge or labour for the business. Moreover, all the partners are equally responsible equally for management of the business and decision making.

Partnership Deed

A partnership deed also known as a partnership agreement is an agreement that specifies the terms and conditions of a partnership. The rights, duties, responsibilities and rules of each and every partner are defined in the partnership deed  to manage, operate and dissolve a partnership. The following information is present in a partnership deed:

1. The address and name of the partnership
2. The address and name of all the partners
3. Nature of the business of the partnership
4. Each partner’s capital contributions
5. The sharing ratio of profit among the partners
6. The responsibilities and roles of each partner
7. Rules for managing making decision for a partnership
8. Process of entry and withdrawal of the partners
9. The process for the resolution of a dispute among the partners
10. Rules to dissolve a partnership

A partnership deed that has been drafted properly may prevent a lot of disputes and conflicts between the partners of the company by accurately specifying the terms of the partnership. A partnership deed also acts like a legal document which may be helpful in enforcing the rights and responsibilities of each and every partner in the dispute or the legal proceeding.

Types of Partnership Deeds

Partnership deeds have been classified into three types:

• General partnership deed
• Limited partnership deed
• Limited liability partnership deed

General Partnership Deed

The type of partnership deed that is the most common is the general partnership deed. It mentions the responsibilities and roles of each of the partners. It also outline the capital contribution of each partner along with their profit sharing ratio and the management of the company’s business.

Limited Partnership Deed

Under limited partnership deeds, both the general and limited partners are included. The general partners are responsible for managing the business and also possess unlimited liability for all the debts of the partnership. Whereas, the limited partners are investors who are usually passive and possess limited liability. This means that the liability of the limited partners is limited only to the amount of the capital that they contribute.

Limited Liability Partnership Deed

An LLP also known as a Limited Liability Partnership is a kind of partnership under which all the partners only possess limited liability. Under the LLP agreement, the roles and responsibilities of the partners, the capital contributions of the partners, their profit-sharing ratio and the managing of the limited liability partnership business are specified. The LLP agreement also specifies the relation between the partners and the limited liability partnership.

Conclusion

In this blog, we discussed in detail partnership, partnership deeds and the various types of partnership deeds like General partnership deed, limited partnership deed, and limited liability partnership deed.