Question

A B and C are partners sharing profits and losses equally,They decided not to have a partnership deed.Explain the provisions to be taken into consideration.
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Answer 1

A partnership deed is a document that defines the relationship among the partners. It helps settle any sort of disagreement/disputes that may arise. It is not compulsory to adopt it, but it is desirable as it can help prevent issues that may arise.

According to the Indian Partnership Act, 1932, if the Partnership deed is not taken/is silent, the following provisions are to be taken into consideration:

1. Profits and Losses

• Profits and losses must be shared equally among the partners. As per the question, the three partners are sharing their profits and losses equally.

2. Interest on capital

• Interest on capital will not be charged on any of the partners' capitals.

3. Interest on drawings

• Interest on drawings will not be charged on any of the partners' drawings.

4. Interest on loan by a partner

• Interest on loan by a partner is allowed at 6% p.a. It will be paid howsoever, whether the firm earns profit or loss.

5. Remuneration to partners

• Remuneration will not be paid to any of the partners.

6. Admission of a partner

• A new partner cannot be admitted unless all the partners agree on the admission.