Understand what you are choosing before you sign. In a partnership every partner is personally liable, jointly and severally, for the whole of the firm’s debts, and each partner can bind the others by ordinary acts of business. If limited liability matters, incorporate an LLP or a company instead. If a partnership is genuinely the right form, register the firm — an unregistered firm cannot sue to enforce its contracts.
Partnership Deed
[FIRM NAME]
Understand what you are choosing before you sign. In a partnership every partner is personally liable, jointly and severally, for the whole of the firm’s debts, and each partner can bind the others by ordinary acts of business. If limited liability matters, incorporate an LLP or a company instead. If a partnership is genuinely the right form, register the firm — an unregistered firm cannot sue to enforce its contracts.
THIS DEED OF PARTNERSHIP is made at [PLACE] on [DATE]
AMONG:
(1)[PARTNER 1], [son / daughter of ______, aged ______ years], residing at [ADDRESS], holding PAN [PAN];
(2)[PARTNER 2], [particulars and PAN]; and
(3)[PARTNER 3], [particulars and PAN],
(each a "Partner" and together the "Partners").
Recitals
A.The Partners have agreed to carry on business in partnership on the terms recorded in this Deed.
B.This Deed records the terms of the partnership and governs the mutual rights and duties of the Partners, in substitution for the provisions of the Indian Partnership Act, 1932 (the "Act") to the extent that Act permits.
NOW THEREFORE the Partners agree as follows:
1. Name, Business and Duration
1.1The partnership shall carry on business under the name and style of [FIRM NAME] (the "Firm").
1.2The business of the Firm is [DESCRIBE THE BUSINESS PRECISELY], and such other business as the Partners may unanimously agree in writing.
1.3The principal place of business of the Firm is at [ADDRESS]. The Firm may carry on business at such other places as the Partners agree.
1.4The partnership shall be a [partnership at will / partnership for a fixed term of ______ years from ______ / partnership for the duration of the venture described above]. (This choice matters. A partnership at will may be dissolved by any partner on notice; a fixed-term partnership may not. Specify.)
1.5The partnership shall commence on [DATE].
1.6The accounting year of the Firm shall end on [31 March] in each year.
2. Capital and Contributions
2.1The initial capital of the Firm shall be ₹ [AMOUNT], contributed by the Partners in the amounts set out in Schedule 1, by the dates stated.
2.2A contribution in kind shall be valued as stated in Schedule 1, and the basis of valuation shall be recorded in the books of account.
2.3Further capital shall be contributed by the Partners in proportion to their existing capital, as and when the Partners unanimously agree. No Partner shall be obliged to contribute further capital.
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These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
Every partner is personally liable, jointly and severally, for the whole of the debts of the firm, and a creditor may proceed against any partner’s personal assets for the whole amount. Each partner can also bind the others by acts done in the ordinary course of the business, whether or not the other partners knew. If those two consequences are unacceptable, the answer is an LLP or a company, not a carefully drafted partnership deed.
Registration is optional, but an unregistered firm cannot bring a suit to enforce a right arising from a contract, and a partner of an unregistered firm cannot sue the firm or the other partners to enforce a right under the partnership deed. The bar is discovered at the worst possible moment — when the firm needs to recover a debt or when partners fall out. Register at the outset, and record every change in the constitution of the firm as it happens.
A partnership at will may be dissolved by any partner giving notice, at any time, without cause. A partnership for a fixed term or for a particular venture cannot. Clause 1.4 forces the choice. Leaving it unstated means the partnership is at will by default, which gives every partner an unrestricted exit and, with it, the ability to force a dissolution.
Remuneration to working partners and interest on capital are deductible in computing the income of the firm only if they are authorised by, and are in accordance with, the terms of the partnership deed, and only for a period after the date of that deed. A deed executed in March authorising remuneration for the year then ending does not achieve the deduction. Where remuneration is being introduced or changed, execute and stamp a supplementary deed before the period begins, and confirm the current limits and the permissible rate of interest with your tax adviser.
A partner may be expelled only where the deed confers the power, only by a majority acting in good faith, and only in the interests of the firm. An expulsion that fails any of those tests is void, and the expelled partner remains a partner with full rights — including a share of the profits earned in the interim. Clause 8.2 confers the power, defines the grounds, and requires notice and a hearing, which is what makes an expulsion defensible.
A retiring partner remains liable to third parties for acts done in the name of the firm after retirement until public notice is given in the manner the Act requires. Giving notice to the other partners, or updating the bank mandate, is not enough. Give public notice, update the register of firms, and tell the firm’s bankers, customers and suppliers in writing.
The default position is that a firm is dissolved by the death of a partner. Clause 8.3 displaces that so the business continues. Without such a clause, the death of one partner in a three-partner firm dissolves the whole firm, which is rarely what anyone intended.
Clause 8.5(c) requires an express choice: either the outgoing partner is paid for goodwill on a stated basis, or the partners agree that goodwill is not valued on cessation. Silence produces a dispute at exit, because goodwill is often the largest single number and there is no default answer that both sides will accept.
Assets bought with the firm’s money or acquired for the firm’s business are the firm’s property, even if registered in a partner’s name. Where a partner brings in premises, equipment or intellectual property intending to retain ownership, that must be recorded expressly — Schedule 1 provides the place. Otherwise it will be treated as the firm’s on dissolution.
A minor cannot be a partner but may be admitted to the benefits of the partnership, sharing profits without personal liability for losses. On attaining majority, that person must elect within the prescribed period whether to become a partner and must give public notice. Failing to make and notify the election has consequences for liability. Take advice before admitting a minor.
Clause 8.8 imposes confidentiality and non-solicitation only. Section 27 of the Indian Contract Act, 1872 voids restraints of trade, and a post-cessation non-compete on a former partner is not enforceable except within the narrow exception for the sale of goodwill. The duty not to compete during the partnership, in Clause 4.3(e), is enforceable and is the one that matters.
A partnership deed attracts State-specific stamp duty, in several States calculated by reference to the capital. Execute on stamp paper of the correct value in the State stated as the place of execution, take two witnesses, and give each partner an executed copy. A supplementary deed is separately stampable, and an understamped deed is inadmissible in evidence until duty and penalty are paid.
Reflects Indian law current as of {{DATE OF USE}}. Registration procedure, stamp duty rates, and the tax limits on partner remuneration and interest on capital all change — have this deed reviewed by a chartered accountant and, where the firm holds immovable property, by a lawyer before execution.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, company secretary, or chartered accountant as relevant) before you rely on it.