In India, most of the business organization is established in a partnership. It generally happens in medium scale business. So, it is essential to understand the meaning and partnership deed advantages.
What is Partnership deed?
A Partnership is one of the businesses forms where more than two individuals come together and agree to operate a company according to the terms and conditions are written on an agreement. Such type of document which includes all the terms of the agreement is called ‘Partnership Deed’. This document outlines all the vital details, each partners powers, rights, responsibilities, and duties.
The deed provides a legal contract between the partners of the company. It also declares the profit sharing ratio, name-address of the firm, nature of business as well. However, registration of the partnership deed is not compulsory to run the partnership firm.
Partnership Deed Advantages
Though it is not mandatory to register a deed, however, the following are the key benefits of having a well-drafted Partnership agreement.
- Avoid Disputes – It helps to avoid dispute between partners as roles, responsibilities, and are specified for each partner.
- Clear Ownership – Partnership firm consists of more than two owners. This agreement or deed helps in segregating each partners designation, responsibilities, and ownership division without creating any confusion.
- Written Record – By entering into a legal written agreement, it leaves little scope for things to get messy in future.
- Transparent Renumeration – The deed includes conditions which explain the percentage of remuneration (salary) that each working partners will be paid. However, the interest is paid to all the partners who have brought in the funds to start the business.
It might be challenging to operate a partnership firm without a legal deed to avoid disputes and differences. Therefore, it is advised to have a well-defined partnership deed before initiating any partnership business.
The details mentioned above are required to have a basic knowledge of the Partnership Deed. For more information on commerce subjects stay tuned to BYJU’S.