Is a partnership deed mandatory in India?

No, a written deed is not legally mandatory, but it is highly recommended to avoid disputes. Without it, the default rules of the Indian Partnership Act, 1932, will apply, which might not suit your business arrangement.

Is registration of a partnership firm compulsory?

Registration is optional. However, an unregistered firm cannot file a lawsuit against a third party to enforce a right arising from a contract, making registration a practical necessity for business operations.

What stamp duty is required for a partnership deed?

The stamp duty varies by state and the amount of capital contributed. It can range from a few hundred rupees to several thousand. You must check your respective state's Stamp Act for the correct amount.

Can profit sharing be unequal?

Yes, partners can agree to any profit-sharing ratio (e.g., based on capital or effort). This must be specified in the deed; otherwise, the law presumes an equal share.

Can partners draw a salary?

Yes, if the deed explicitly provides for it. A salary can be paid to working partners, and it is treated as a business expense for tax purposes. Without this clause, no partner is entitled to remuneration.

How do you add or remove a partner?

A new partner can be added only with the consent of all existing partners. The procedure for admission, retirement, or expulsion should be clearly outlined in a supplementary deed.

What happens if a partner dies?

The firm is automatically dissolved unless the partnership deed contains a clause stating that the firm will continue with the remaining partners. The deceased partner's heirs are entitled to their share but do not automatically become partners.

Can a partnership take loans?

Yes. The partners are jointly and severally liable for all debts of the firm. The deed can specify which partners have the authority to borrow on behalf of the firm.

Is an online-generated deed template useful?

Yes, an online template provides a good starting point. However, it must be printed on the appropriate value of stamp paper and signed by all partners to be considered properly executed.

What is the maximum number of partners allowed?

Under the Companies Act, a partnership can have a maximum of 50 partners.

Partnership Agreement Format & Generator Online

Partnership Deed in India: Building a Strong Business Foundation

Launching a business with partners brings together diverse skills, shared risks, and collective ambition—making partnership one of the most popular business structures for small and medium enterprises in India. However, without a clear written agreement, even the strongest partnerships can face misunderstandings, disputes, or challenges. A well-drafted partnership deed serves as the blueprint for your business, outlining how it will operate, how profits will be shared, and how conflicts will be resolved.

This guide covers everything about partnership deeds in India: their purpose under the law, essential clauses, registration benefits, preparation process, common pitfalls, and tips to create a robust agreement that supports long-term success.

What is a Partnership Deed?

A partnership deed, also known as a partnership agreement, is a written contract between partners that details the terms governing their business relationship. It covers capital contributions, profit-sharing, management responsibilities, and procedures for key events like admission, retirement, or dissolution.

Partnerships are regulated by the Indian Partnership Act, 1932. While oral agreements are valid, a written deed is strongly recommended to override default provisions and provide clarity.

Why a Written Partnership Deed is Crucial

Without a custom deed, the Act's default rules apply—such as equal profit-sharing regardless of capital input—which may not suit your arrangement. A tailored deed offers:

Precise definition of profit and loss distribution
Clear allocation of roles and decision-making powers
Rules for handling partner changes or exit
Strong evidentiary value in case of disputes
Flexibility to include partner salaries or interest on capital
Framework for dissolution and asset distribution

Essential Clauses Every Deed Should Include

A comprehensive deed must address:

Names, addresses, and details of all partners
Firm name, nature of business, and principal place
Initial and additional capital contributions
Profit/loss sharing ratio
Interest on capital, loans, and drawings
Remuneration or commission to active partners
Management structure and voting rights
Bank account operations and cheque signing authority
Maintenance and audit of accounts
Admission, retirement, or expulsion procedures
Dissolution process and goodwill valuation
Arbitration for dispute resolution

Registration of Partnership Firm: Benefits and Process

Registration is optional but highly beneficial. Unregistered firms have limited recourse in courts. To register:

Execute the deed on stamp paper
All partners sign
Submit Form 1 with deed to state Registrar of Firms
Pay fee (varies by state and partners)
Receive registration certificate

Many states offer online facilities.

Stamp Duty and Costs

Stamp duty ranges from ₹500–₹10,000+ based on capital and state rules. Check portals like Maharashtra GRAS for current rates.

Common Mistakes Partners Make

Leaving profit ratio unspecified (defaults to equal)
No provision for partner remuneration
Vague clauses on retirement or dissolution
Skipping registration to save costs
Not updating deed after partner changes

Tips for a Thriving Partnership

Select partners with trust and complementary strengths
Discuss all terms openly upfront
Include an arbitration clause for quick resolution
Review the deed annually or on major changes
Maintain transparent accounting

As your business grows, consider additional documents like an NDA Agreement or Employment Contract.

Conclusion

A thoughtfully prepared partnership deed is the cornerstone of a successful venture, providing clarity, protection, and flexibility as your business evolves.

Our free generator creates a professional, fully customizable partnership deed instantly—tailored for Indian guidelines and ready for registration. Start your partnership with confidence and security!

Related Tools:
Rent Agreement | NDA Agreement | Loan Agreement | Will Draft

For partnership registration details, visit your state's Registrar of Firms or the Ministry of MSME portal.

Partnership Agreement Generator

Guide to Partnership Deed in India