What partnership deed means
A partnership deed is the constitution of a partnership.
A partnership exists where two or more people carry on business together with a view to profit. It can come into existence without any document at all, which is exactly the problem. The relationship exists, the liabilities exist, and nothing records what the parties actually agreed.
The deed fixes that. It records profit and loss shares, capital contributions, what each partner is responsible for, how decisions are taken, how disputes are resolved, how a partner joins or leaves, and what happens on death or incapacity.
Without it, default rules apply. Those rules generally assume equal profit shares regardless of what each partner contributed, equal say in management regardless of effort, and no entitlement to a salary for work done. They are a starting point, and they suit very few real partnerships.
How it is used
A workable deed covers a specific list.
Name, business and duration. Capital contributed by each partner and whether it is repayable. Profit and loss sharing, which need not match capital. Whether partners draw salaries or drawings, and how much. Roles and decision making, including which decisions need unanimity and which need a majority.
Banking and signing authority. Accounts and access to records. Restrictions on partners binding the firm without approval, which matters because a partner can bind the firm in the ordinary course of business.
Admission of new partners. Retirement and expulsion. What happens on death or incapacity, including whether the firm continues.
How a departing partner is paid out and how their share is valued, which is the single most disputed clause in any partnership.
Non compete and confidentiality after departure. And dispute resolution.
Key features
- Records shares, roles, decision making and exit between partners
- A partnership can exist without any written agreement
- Default rules assume equal shares and equal management rights
- Partners are jointly and severally liable for partnership debts
- Each partner can bind the firm in the ordinary course of business
- Business name registration at the CAC is separate from the deed
How this works in Nigeria
Two features of Nigerian partnership carry real risk and are frequently misunderstood.
The first is unlimited liability. A partnership is not a separate legal person in the way a company is, so partnership debts are the partners' debts. Personal assets are exposed.
The second is joint and several liability. Each partner is liable for the whole of the partnership's debts, not for their share. A creditor pursues whichever partner has assets, and that partner then has to recover from the others. A partner who contributed twenty percent of the capital can be pursued for one hundred percent of a debt.
Combined, those two make the choice between a partnership and a company a serious one. Where the business carries real exposure, incorporating is usually the better answer, and the founders agreement then does what the partnership deed would have done.
Registration is the third point. A partnership trading under a name that is not simply the partners' own names registers that business name with the CAC. Registration records the name; it does not create a separate legal person and it does not limit liability. The deed governs the relationship between the partners, and it is a different document doing a different job.
Limited partnerships and limited liability partnerships were introduced by CAMA 2020, and they change the liability position where they are used, so a partnership carrying significant risk should consider them.
Partnership vs company vs business name
Three structures Nigerian founders choose between, with very different consequences.
A partnership is a relationship between people carrying on business together. It is not a separate legal person, partners are jointly and severally liable for its debts, and personal assets are exposed. Its advantage is simplicity and flexibility.
A company is a separate legal person. It owns its assets, owes its debts, protects shareholders from those debts in the ordinary course, can take investment through shares, and survives changes of ownership. It costs more and carries filing obligations.
A business name is a registration, not a structure. It records that a person or partnership trades under a particular name. It creates nothing and protects nobody.
So two people trading together under a registered business name are in a partnership with unlimited liability, whatever the certificate says. If the exposure is real, incorporate.
Limits and risks
A deed governs the partners' relationship with each other. It does not limit liability to outsiders. An agreement that one partner bears no responsibility for a category of debt binds the partners between themselves and does nothing against a creditor.
Partnerships also lack continuity. Death, retirement or bankruptcy of a partner can dissolve the firm unless the deed provides otherwise, which is why continuation clauses matter.
Raising outside investment is difficult, because there are no shares to issue.
And exit is where partnerships break. Valuing a departing partner's share, and funding the payment, is the clause most often absent and most often litigated.
Worth knowing
Write the exit clause first, not last. How a departing partner's share is valued, over what period it is paid, and what happens on death are the terms that destroy Nigerian partnerships, and they are always easier to agree while everybody still gets along.
Questions people ask
Do I need a written partnership agreement?
A partnership exists without one, which is the problem. Without a deed, default rules apply that assume equal profit shares and equal management rights regardless of what each partner contributed.
Are partners liable for each other's debts?
Yes. Partners are jointly and severally liable for partnership debts, so a creditor can pursue any one partner for the whole amount. That partner then has to recover from the others.
Does registering a business name limit my liability?
No. Business name registration records the name you trade under. It creates no separate legal person and provides no liability protection. Only incorporation, or one of the limited partnership forms, changes that.
What should a partnership deed include?
Capital contributions, profit and loss shares, drawings, roles and decision making, banking authority, admission of partners, retirement and expulsion, death and incapacity, how a departing partner is paid out, restrictions after departure, and dispute resolution.
Can one partner bind the whole partnership?
Generally yes, in the ordinary course of the partnership's business. That is why the deed should restrict what a partner may commit the firm to without the others' approval.
Should we form a partnership or a company?
If the business carries real financial exposure, incorporate. A company is a separate legal person that protects personal assets, survives changes of ownership and can take investment. A partnership offers simplicity at the cost of unlimited personal liability.