Q.Sonam and Sameer decided to begin a food processing business in District Kangra of Himachal Pradesh. Help them in developing the partnership deed to avoid any dispute in future.

A partnership deed is the written agreement recording the terms governing the partnership. For their food-processing firm, it should include:

• Name of the firm and the nature and location of the business (food processing in District Kangra).
• Duration of the business.
• Capital contributed by Sonam and Sameer each.
• Distribution of profits and losses (the sharing ratio).
• Duties and obligations of each partner, and their salaries and withdrawals.
• Terms for admission, retirement and expulsion of a partner.
• Interest on capital and interest on drawings.
• Procedure for dissolution of the firm. …

Why a partnership deed

A partnership is a voluntary association of people coming together for common objectives. To avoid misunderstandings later, it is essential to have a clear agreement covering the terms and conditions among the partners. Although an agreement may be oral, a written agreement is advisable because it serves as evidence of what was agreed. This written agreement is called the partnership deed. For Sonam and Sameer, starting a food-processing business in District Kangra, a well-drafted deed is the best safeguard against future disputes.

What their partnership deed should contain

Help them include the following:

• Name of the firm: the name under which their food-processing business will operate.
• Nature of the business and its location: food processing, based in District Kangra, Himachal Pradesh.
• Duration of the business: whether it is for a fixed period, a particular purpose, or at will.
• Investment (capital) made by each partner: how much Sonam and how much Sameer each contribute.
• Distribution of profits and losses: the ratio in which they will share profits and bear losses.
• Duties and obligations of the partners: what each partner is responsible for (for example, one may handle production and the other marketing).
• Salaries and withdrawals of the partners: any remuneration and how much each may draw from the firm.
• Terms on admission, retirement and expulsion of a partner: how a new partner may join and how a partner may leave or be removed.
• Interest on capital and interest on drawings: whether interest is allowed on capital contributed and charged on drawings.
• Procedure for dissolution of the firm: how the firm will be wound up if they decide to close it.
• Preparation of accounts and their auditing: how the books will be maintained and checked. …