What is a partnership: Investigating partnership deeds
You should look through the Partnership Deeds to check for
the clauses dealing with these points:
- How much of the opening capital was
provided by each partner. (This could involve a lifetime transfer
on the commencement of the partnership if a part of one partner's
initial contribution was assigned to one or more of the other
partners. An example would be if the deceased took a child into
partnership and the capital of the deceased's former (sole trader)
business was credited in equal shares to each of the partners'
opening capital account. In a situation of this kind you should
seek guidance from Technical Group (TG).
- The type of business.
- The date the partnership began.
- How profits and losses were shared. (This
is known as the profit sharing ratio. This ratio can be changed if
the partners wish and such changes may give rise to a lifetime
claim if there are substantially undervalued assets in the balance
sheet at the time of change. Refer any such case to TG. This is an
important point because, usually, any increase in capital values is
shared amongst the partners in the same proportions as the profits
- Rights and duties of the partners.
- What happens on the death or retirement of