What are the types of Partnership Deed?

Basically there are four types of partnership deed but we can categorise those partnerships into two types on the basis of

  1. Duration
  2. Liability
types of partnership deed

Duration: It depends upon the Time Period of partnership

Liability: It depends upon the Liability of all the partners

Let’s discuss the types of partnership deed on the basis of duration first.

Click Here If you want to know what is a Partnership Deed.

There are mainly two types of partnership deeds on the basis of Duration.

Partnership at Will

2

It is a partnership formed for an indefinite period. The time period of the partnership is not mentioned at the time of its formation.It depends upon the will of all the partners.

For example, If 3 partners thought that lets make a partnership and continued that partnership until the will of all the partners. And then all the 3 partners decided to end the partnership, then the partnership will be ended. It can continue for any length of time depending upon the will of the partners. It can be dissolved by any partner by giving a notice to the other partners of his desire to quit the firm.

It’s that simple, if partners want to start the partnership they can start and if they want to end the partnership, they can end it whenever they want to.

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Particular Partnership

3

As the name suggests, it is mainly created for a task, contract, project, construction etc. Means, this partnership is only valid till the time the goal of making this partnership is accomplished. This partnership is only valid for a particular duration.

It is a partnership formed for a specific time period or to achieve a specified objective. It is automatically dissolved on the expiry of the specified period or on the completion of the specific purpose for which it was formed.

For example, 3 people have decided to create a society. They created a partnership before starting to make the society. So they created a partnership firm for that purpose but when the society is going to get completed, at that point their partnership will also end.

Now, Let’s come to the type of partnership deed based upon Liability.

See this also: Importance of Partnership Deed in India

On the basis of Liability, we can further categorise it into 2 types of partnership.

General Liability

4

This type of Partnership is unlimited in nature. Lets understand this with an example. Suppose 4 partners started a General Liability partnership and if they need to satisfy the debts of the business then they have to satisfy the debts by burning the money from their own pockets. So, the liability of all the partners will be the same as well as unlimited.

In this kind of partnership, everyone (all the partners) have the right to participate in the management. All the management and administration work can be done by all the partners. 

In this type of partnership, everyone has equal rights. No one is less or more important in this kind of partnership.

Last but not the least, one can represent all. Which means one partner can take any decision or can sign any contract on behalf of all the other partners. Here mutual agency comes into the picture. Now you must be wondering,What is mutual agency?

Mutual Agency can be formed by all the partners. In this, one out of all the partners can represent itself as an agent and other partners will become principal. By making a mutual agency, any of the partners can act as an agent and can take major decisions on behalf of other partners.

Each partner of a general partnership is entitled to take active part in the management of the firm, unless otherwise decided by the other partners.

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Limited Liability

5

In general partnership, the liabilities of all partners are unlimited. But in limited partnership, the liability of at least one partner should be limited. It is mandatory to register such partnerships. This form of partnership did not exist in India earlier. It only came into practice in India after the introduction of New Small Enterprise Policy in 1991.

This type of partnership is slightly different from any other partnerships. It is a mix and match of basic partnership and any other types of partnership.

In this type of partnership, one partner can have unlimited liability and the rest of the partners have limited in nature liability.

And yes, other partners cannot be in management. Why?

Let me ask you a question, Let’s suppose you are the person who is having Liability (Unlimited in Nature), and you know if your business will not work properly then you have to sell your personal assets to satisfy the debts. So, in this scenario, will you be comfortable to give permission to all the partners to participate in management?

Of Course No, because if you are the only person who is responsible for all the loss and only you have to pay all the debts, manage all the things alone then why would you want to move forward with someone else’s decision.

So, the partners having Limited in Nature- Liability will not have the power to participate in management and the management will only be handled by the person whose liability is unlimited in nature.

The person who has unlimited liability can represent other partners but other partners don’t.

I hope now it’s clear to you that these are the four main types of Partnership Deed in India. If you want to create your partnership deed in minutes then you should definitely check out eSahayak.

Cheers!

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