What is Partnership Deed, and the Limitations of Partnership form?
It is the written agreement that is duly stamped and registered. Each partner gets a copy of the deed, after it gets registered. It can be oral or written but it is important for a firm. It contains various particulars like name of the firm and partners, nature of business, profit and loss sharing ratio of each partner, rate of interest on capital, duties, powers of partners, amount of capital contributed by each partner, remuneration payable to active partner, maintenance of accounts and arrangements for audit etc.
Limitations of Partnership Form:
- Unlimited liability: The major disadvantage of such firm is that partners have unlimited liability.
- No public confidence: Such firms cannot gain the public’s confidence because they do not publish or public’s the accounts.
- Transfer of interest: Without getting the consent of other partners, one cannot transfer his interest to an outsider.
- Uncertainty: Such a form is uncertain because it gets dissolved if any partner dies or becomes insolvent & lunatic.
- Limited capital: Such firms have limited capacity to raise capital because of the limit of maximum partners.
- Conflicts: Misunderstanding and conflicts may arise among the partners. This may lead to delay in decision making and dissolution of a firm.