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Partnership Deed Format — Free Sample in Word and PDF

A partnership deed is the written agreement between the partners of a firm: who they are, what each brings in, and how profits, losses and decisions are shared. Fill in your partners and terms below, or tap "See an example" to see a completed deed.

Sample partnership deed format — edit it live

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Partnership deed format for a fixed term

For a firm set up for a set number of years, with the bank account run by all partners jointly.

PARTNERSHIP DEED

This Deed of Partnership is made at [City] on [Date] between:

  1. [First Partner], [S/o, D/o or W/o Name], aged [ ] years, residing at [Address] (the "First Partner")
  2. [Second Partner], [S/o, D/o or W/o Name], aged [ ] years, residing at [Address] (the "Second Partner")

(together the "partners", which expression includes their legal heirs, representatives and permitted assigns). The partners have agreed to carry on business in partnership as [Firm Name] and wish to record the terms in writing. NOW THIS DEED WITNESSES as follows:

Partners' capital and share of profit and loss

PartnerCapital contributionShare of profit and loss
[First Partner][Amount]50%
[Second Partner][Amount]50%
Total—100%
  1. Name and place of business: The partnership business shall be carried on under the name and style of [Firm Name] (the "Firm"), with its principal place of business at [Address of the principal place of business], or at such other place or places as the partners may agree from time to time.
  2. Commencement and duration: The partnership shall be deemed to have commenced on [Date]. The partnership shall be for a fixed term of 5 year(s) from that date, unless dissolved earlier under this Deed. If the partners carry on the business after the term ends without a new deed, the partnership shall continue as a partnership at will on the terms of this Deed so far as they apply.
  3. Business: The business of the Firm shall be [Describe the business the firm will carry on], and such other lawful business as the partners may agree in writing from time to time.
  4. Capital: The initial capital of the Firm shall be [Total capital], contributed by the partners in the amounts set out in the table above. Further capital, if required, shall be brought in by the partners in such proportion as they agree. Each partner's capital shall be recorded in a separate capital account.
  5. Profit and loss sharing: The net profits of the Firm, after providing for interest on capital and remuneration to working partners as set out in this Deed, shall be shared by the partners in the proportions set out in the table above, and the losses, if any, shall be borne in the same proportions.
  6. Interest on capital: No interest shall be paid on the partners' capital unless all partners agree otherwise in writing. Any interest so agreed shall be subject to the limits allowed under income-tax law.
  7. Remuneration: The partners actively engaged in the conduct of the business (the "working partners") may be paid such remuneration as all partners agree in writing from time to time, subject to the limits allowed under income-tax law.
  8. Books of account and accounting year: Proper books of account shall be kept at the principal place of business, and every partner shall have free access to inspect and copy them. The accounting year of the Firm shall run from 1 April to 31 March. At the end of each accounting year the accounts shall be closed, a profit and loss account and balance sheet prepared, and the accounts signed by all partners, which shall then bind them except for a manifest error found within three months.
  9. Bank account: The Firm shall maintain its accounts with such bank(s) as the partners decide. The accounts shall be operated by all partners jointly, and no cheque, transfer or other instruction shall be valid unless signed or authorised by every partner.
  10. Duties of partners: Each partner shall be just and faithful to the others, devote such time and attention to the business as the partners agree, and render true accounts. No partner shall, without the written consent of the other partners: carry on any business competing with the Firm; stand surety or guarantee for anyone on behalf of the Firm; borrow or lend money on behalf of the Firm outside the ordinary course of business; transfer or mortgage their share in the Firm; or use the Firm's name, property or credit for their own purposes.
  11. Admission of a new partner: A new partner may be admitted only with the written consent of all existing partners, on such terms as to capital and share of profits as they agree. The new partner shall sign a deed of admission agreeing to be bound by this Deed.
  12. Retirement: A partner may retire by giving the other partners not less than three months' notice in writing. The retiring partner shall be paid the balance in their capital and current accounts, together with their share of profit up to the date of retirement, as shown by accounts drawn up to that date, in such instalments as the partners agree. The remaining partners may continue the business under the same name.
  13. Death or insolvency: The death, insolvency or retirement of a partner shall not dissolve the Firm as between the remaining partners, who may continue the business. The legal heirs or representatives of a deceased partner shall be paid the amount due to that partner, calculated as under the Retirement clause, but shall not become partners unless all remaining partners agree in writing.
  14. Dissolution: The Firm may be dissolved by the written agreement of all partners, or as otherwise provided by the Indian Partnership Act, 1932. On dissolution the assets shall be realised, the debts and liabilities of the Firm paid, each partner's capital repaid, and any surplus or deficit shared in the profit-sharing proportions.
  15. Arbitration: Any dispute between the partners, or between a partner and the legal representatives of another partner, relating to this Deed or the Firm shall first be resolved by discussion. Failing resolution, it shall be referred to a sole arbitrator appointed by agreement under the Arbitration and Conciliation Act, 1996, seated at [City]. Subject to that, the courts at [City] shall have jurisdiction.
  16. Amendment: The terms of this Deed may be changed only by a supplementary deed or written agreement signed by all partners. In all matters not covered by this Deed, the provisions of the Indian Partnership Act, 1932 shall apply.

IN WITNESS WHEREOF, [First Partner] and [Second Partner] have signed this Deed on the date and at the place first written above.

_______________________________

[First Partner]

First Partner

Date: ____________________

_______________________________

[Second Partner]

Second Partner

Date: ____________________

Witnesses

_______________________________

Witness 1

Name and address

Date: ____________________

_______________________________

Witness 2

Name and address

Date: ____________________

Fill in your details and download this as Word

How to make a partnership deed

  1. 1

    Name the firm and its address

    Enter the firm's name and principal place of business, and the date of the deed.

  2. 2

    Add each partner

    Give each partner's name, father's or spouse's name, age, address, capital and share of profit. Make sure the shares total 100%.

  3. 3

    Describe the business

    Say what the firm will do, with room to take on related work.

  4. 4

    Set the money terms

    Choose interest on capital and remuneration for working partners, if any, and agree the figures with your CA.

  5. 5

    Choose how the bank account is run

    Any one partner, all jointly, or named partners only.

  6. 6

    Print on stamp paper and sign

    Print on stamp paper of your state's value, have all partners sign before two witnesses, then register the firm.

What a partnership deed is, and why you need one in writing

A partnership deed is the written agreement between the partners of a firm. It records who the partners are, what business the firm will do, how much capital each brings in, how profits and losses are shared, who can operate the bank account, and what happens when someone joins, leaves or dies. A partnership firm in India is governed by the Indian Partnership Act, 1932.

Strictly, a partnership can exist on an oral agreement. In practice you will not get far without a written deed. The bank will ask for it to open the firm's current account, the Income Tax Department needs it for the firm's PAN, the GST portal asks for it at registration, and the Registrar of Firms needs it if you register the firm. More importantly, it is the only thing that settles an argument between partners five years later about who agreed to what.

Where the deed is silent, the Act fills the gap with default rules, and those defaults often surprise people. For example, without a deed saying otherwise, partners share profits equally regardless of how much capital each put in, and no partner is entitled to a salary for working in the business. If that is not what you agreed, write it down.

Registered or unregistered firm: what changes

Registering a partnership firm with the Registrar of Firms in your state is optional. The firm exists from the day the partners agree to it, registered or not. But an unregistered firm carries a real handicap: under Section 69 of the Indian Partnership Act, 1932, an unregistered firm cannot file a suit to enforce a right arising from a contract against a third party, and a partner cannot sue the firm or the other partners to enforce rights under the partnership. A customer who does not pay is much harder to chase.

Registration can be done at any time, including years after the firm started, and it is usually a short process: you file an application with the partners' details and the deed, pay the state's fee, and receive a certificate. Many states now take the application online. Because rules, fees and forms differ from state to state, check with your state's Registrar of Firms or a professional before you file.

Registered firmUnregistered firm
Exists legally?YesYes
Can sue customers or suppliers on a contractYesRestricted
Partner can sue the firm or other partners on the deedYesRestricted
Can be sued by othersYesYes
Bank account, PAN, GSTAvailableAvailable with the deed, though some banks prefer registration
Credibility with lenders and government schemesHigherLower

Stamp paper, signing and notarisation

A partnership deed is an instrument that attracts stamp duty, and each state sets its own rate under its stamp law. In some states it is a fixed amount; in others it depends on the capital contributed. Check your state's current schedule, then buy non-judicial stamp paper or e-stamp paper of that value in the name of one of the partners, before or on the day you sign. Many states let you buy e-stamp paper online or from an authorised vendor.

Print the deed on the stamp paper (continuing on plain paper if it runs long), and have every partner sign every page. Two witnesses sign at the end with their names and addresses. A deed that is not properly stamped can be refused as evidence until the duty and any penalty are paid, so do not skip this step to save a small amount.

Notarising the deed is not a legal requirement in most cases, but it is common practice and many banks ask for a notarised copy. Registering the deed itself with the Sub-Registrar is a different thing from registering the firm, and is usually needed only when a partner brings immovable property into the firm as capital. Ask a lawyer if that is your situation.

Partnership firm vs LLP vs private limited company

A partnership firm is the cheapest and quickest structure to set up, which is why so many family and small trading businesses use it. The trade-off is liability: every partner is personally liable, without limit, for the debts of the firm, including debts run up by another partner acting for the firm. If the business might borrow heavily, take on risky contracts, or raise investment, look at the alternatives before you sign.

Partnership firmLLPPrivate limited company
LawIndian Partnership Act, 1932Limited Liability Partnership Act, 2008Companies Act, 2013
Partners' or owners' liabilityUnlimited and personalLimited to agreed contributionLimited to unpaid share capital
Separate legal entityNoYesYes
RegistrationOptional, with the state Registrar of FirmsRequired, with the Ministry of Corporate AffairsRequired, with the Ministry of Corporate Affairs
Founding documentPartnership deedLLP agreementMemorandum and articles of association
Ongoing complianceLightestModerate, with annual filingsHeaviest, with board meetings, audit and annual filings
Raising equity investmentNot practicalDifficultDesigned for it
Startup India recognitionPossible for a registered firmPossiblePossible

How a partnership firm is taxed

For income tax, a partnership firm is a separate taxpayer. It gets its own PAN, files its own return and pays tax on its own profit at the rate that applies to firms for that year. A partner's share of the firm's profit is generally not taxed again in the partner's hands, because the firm has already paid tax on it.

Interest on capital and remuneration paid to partners are treated differently. If the deed authorises them, the firm can deduct them in working out its taxable profit, but only within limits set by income-tax law, and remuneration is allowed only to working partners. The partner then pays tax on that interest and remuneration as their own business income. This is why the deed should state the interest rate and the remuneration, and why the generator says 'subject to the limits allowed under income-tax law' rather than printing a number: the limits change and depend on the firm's profit.

The firm may also need GST registration, a TAN if it deducts tax at source, and a tax audit if its turnover crosses the threshold for the year. Work through these with a CA when you set the firm up, not when the first deadline arrives.

What goes wrong with partnership deeds

Most partnership disputes come from things the deed never addressed. Read your draft against this list before anyone signs.

Profit shares that do not add up
Shares that total 90% or 110% leave the deed open to argument. The generator totals them under the table and flags a mismatch.
Remuneration and interest not in the deed
If the deed does not authorise them, the firm may lose the tax deduction for amounts it pays partners. Write the rate and the remuneration, or the method, into the deed.
No exit rules
Without a retirement and death clause, the Act's defaults can dissolve the firm when one partner leaves or dies. Say how a leaving partner is paid out and that the rest may continue.
One partner can empty the bank account
'Any one partner' is convenient but risky. Joint signing for amounts above a limit is a common middle ground; ask your bank what it can set up.
Business described too narrowly
A firm set up 'to trade in mobile phones' that starts repairing them may need a supplementary deed. Add 'and any other business the partners agree on'.
Changes made by conversation
Every change of partner, capital or profit share should be a signed supplementary deed, and the Registrar should be told if the firm is registered.

Frequently asked questions

Is it compulsory to register a partnership firm in India?

No. Registration with the Registrar of Firms is optional, and an unregistered firm is still a valid firm. But an unregistered firm cannot sue third parties to enforce its contracts, and partners cannot sue each other on the deed, so registration is strongly recommended.

Does a partnership deed need to be on stamp paper?

Yes. A partnership deed attracts stamp duty, and the amount is set by each state. Buy stamp paper or e-stamp paper of the value your state prescribes and print the deed on it. An unstamped deed can be refused as evidence until the duty is paid.

Does the partnership deed need to be notarised?

It is usually not required by law, but notarisation is common practice and many banks ask for a notarised copy when you open the firm's account. It costs little, so most firms do it.

How many partners can a partnership firm have?

At least two. There is an upper limit on the number of partners set under company law; if you are planning a large firm, check the current limit with a CA or lawyer, or consider an LLP.

Can a minor be a partner?

A minor cannot be a full partner, but can be admitted to the benefits of an existing partnership with the consent of all partners. A minor admitted this way is not personally liable for the firm's losses. Get advice before drafting this.

What happens if the deed does not say how profits are shared?

The Indian Partnership Act's default rule applies: partners share profits and losses equally, whatever capital each contributed. If you want a different split, it must be in the deed.

Can partners take a salary from the firm?

Yes, if the deed authorises it. Remuneration to working partners and interest on capital are deductible for the firm only within limits under income-tax law, and only when the deed provides for them. The partner pays tax on what they receive.

How do I add or remove a partner later?

Sign a supplementary deed (a deed of admission or retirement) with all partners, on stamp paper, and inform the Registrar of Firms if the firm is registered. Update the bank, GST and other registrations too.

Can a partnership firm get Startup India recognition?

A registered partnership firm can apply, provided it meets the other conditions for recognition. An unregistered firm cannot. Check the current conditions on the Startup India portal before applying.

Can I convert my partnership firm into an LLP or a company later?

Yes. Both the LLP Act and the Companies Act allow a partnership firm to convert, carrying its assets and liabilities across. It needs the consent of all partners and filings with the Ministry of Corporate Affairs, so take professional help.

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