Partnership Deed and Partnership Agreement Difference

Partnership Deed and Partnership Agreement Difference Explained

When two or more people decide to start a business together, they have the option of forming a partnership. A partnership is a business structure where two or more people share ownership of the business. In a partnership, the partners are responsible for the management of the business and share in the profits and losses.

However, before starting a partnership, there are two important legal documents that need to be considered. These are the partnership deed and partnership agreement. While they may sound similar, they serve different purposes and are crucial in establishing the terms and conditions of the partnership.

In this article, we explore the differences between a partnership deed and partnership agreement, and what each document entails.

Partnership Deed

A partnership deed is a legally binding document that outlines the terms and conditions of the partnership business. It is also known as a partnership instrument and serves as the founding document of the partnership.

The partnership deed typically includes details such as:

• Introduction: The deed starts with an introduction that outlines the names and addresses of the partners involved in the partnership.

• Nature of the partnership: This section highlights the nature of the partnership business, including the type of business activities to be carried out.

• Capital contributions: It outlines the capital contributions that each partner has agreed to make towards the partnership.

• Profit and loss sharing: This section outlines how profits and losses of the business will be divided amongst partners.

• Management: The deed outlines the roles and responsibilities of each partner in the management of the business.

• Termination and dissolution: It outlines the conditions for termination and dissolution of the partnership and also the steps to be taken in the event of any partner leaving the partnership.

Partnership Agreement

A partnership agreement is a legal document that outlines the terms and conditions of the partnership business. It contains detailed information about the relationship between the partners and their responsibilities towards the business.

A partnership agreement usually includes the following:

• Introduction: A partnership agreement usually starts with an introduction that outlines the names and addresses of the partners involved in the partnership.

• Purpose: This section highlights the purpose of the partnership, including the goals and objectives.

• Capital contributions: It outlines the capital contributions that each partner has agreed to make towards the partnership.

• Profit and loss sharing: This section outlines how profits and losses of the business will be divided amongst partners.

• Management: The partnership agreement outlines the roles and responsibilities of each partner in the management of the business.

• Dispute resolution: This section outlines the process for resolving any disputes that may arise between partners.

• Confidentiality clause: It outlines the confidentiality requirements that partners must adhere to in order to protect the business from any potential harm.

• Termination and dissolution: It outlines the conditions for termination and dissolution of the partnership and also the steps to be taken in the event of any partner leaving the partnership.

Key Differences

While both documents serve similar purposes, there are some key differences between a partnership deed and partnership agreement. These differences include:

• Legal status: A partnership deed is a legal document that is required to form a partnership, while a partnership agreement is not mandatory.

• Time of creation: A partnership deed is created at the time of the formation of the partnership, while a partnership agreement can be created before or after the formation of the partnership.

• Scope: A partnership deed covers the basic terms and conditions of the partnership, while a partnership agreement is more detailed and covers a wider range of issues.

• Amendment: A partnership deed cannot be amended later, while a partnership agreement can be amended or modified at any time.

Conclusion

A partnership is a business structure that offers many benefits to its partners. However, before starting a partnership, it is important to consider the legal aspects of the partnership. A partnership deed and partnership agreement are two important legal documents that help to establish the terms and conditions of the partnership.

While both documents serve similar purposes, they are different in terms of when they are created, their scope, and the ability to be amended. Therefore, it is important to consult a legal professional when creating these documents to ensure that they accurately reflect the partnership`s interests and protect the partners from any potential legal issues.


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