What Is the meaning of partnership deed?

A partnership deed, also called a partnership agreement, is a legal document used in a business partnership formation. It details matters pertaining to the duties, liabilities, and mutual rights of the partners. This is equivalent to the memorandum and articles of association of a limited company, but the partnership deed is not regarded as a public document.

Partnership deed importance

To avoid conflict of interest and foster a healthy business relationship among the partners, partnership deeds are road maps to the course of business. They reduce areas of conflict among the member, they are the legal basis for the partnership formation, and they define what is expected of all partners as well as their limitations. Partnership deeds basically ensure that mutual interests of all partners are taken care of, within set-out rules and regulations.

Clauses and contents

These are the guiding framework that partners adhere to and which define a partnership. Clauses and contents include the name and location of the business, method and amount of payment to the partners, arbitration guidelines, lifespan of the business, process of admitting and exiting of new partners, capital structure, and operation of bank accounts. As this is not a complete set of clauses, any mutually agreed-upon clause by the partners is stated in the partnership deed.

Partnership deed advantages

Partnership deeds are easy to create. As a partnership is a legal agreement between two or more parties to come together for a common economic purpose, partnership deeds are an easy way to combine the partners' skills, resources and expertise and legalise a common business undertaking. The legal requirements of a partnership deed formation are easy to formulate.

Partnership deed dissolution

A partnership deed may be dissolved or rendered ineffective upon the mutual agreement of the partnership's members. The partners may write out a consent dissolving the partnership deal, such that it is no longer enforceable to its members.

Partnership deed creation

A partnership may be created by the members of the partnership or drafted out by a solicitor. It is safer to have a legally created partnership deed, because of conflict management among the partnership's members.

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About the Author

Robert Gitachu has been tutoring and writing since 2007. His work appears on eHow, where he shares his experience in banking and financial markets. Gitachu has a Master of Business Administration in finance from Franklin University and a Master of Business Administration in strategic business management from the University of Nairobi.

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