1. Based on Partnership Deed

• The loss-sharing ratio is usually defined in the partnership deed
  
• Partners agree in advance on how losses will be divided
  
• The ratio can be equal or unequal based on mutual consent
  
• Written terms help avoid disputes during financial downturns
  
• If the deed mentions specific terms, those terms will apply
  

2. Equal Sharing in Absence of Agreement

• If no ratio is specified, losses are shared equally by law
  
• This applies regardless of capital contribution or role
  
• The Indian Partnership Act treats all partners equally by default
  
• Equal sharing is automatic unless an alternative is agreed upon
  
• Legal equality ensures fairness in the absence of documentation
  

3. Consideration of Capital and Effort

• Some firms base loss sharing on the capital invested by each partner
  
• Contribution of effort and involvement may also influence the ratio
  
• Losses may be adjusted in proportion to profit-sharing terms
  
• Such terms must be clearly recorded in the deed to be valid
  
• Partners may revise terms if conditions change over time
  

4. Liability of Each Partner

• All partners are jointly and individually liable for firm’s losses
  
• Even if one partner causes the loss, others may share the burden
  
• Each partner’s share of loss depends on the agreed ratio or the legal rule
  
• Partners must cover losses from personal funds if needed
  
• Unlimited liability applies unless stated otherwise in special cases
  

5. Treatment of Losses for Minor or Retired Partners

• A minor admitted for benefits is not liable for losses
  
• Retired partners are not responsible for future losses after exit
  
• Their liability continues only until the date of retirement
  
• Death or insolvency also ends future liability
  

Public notice ensures that no further claims arise against such partners