What is the Shar'i guidance on profit allocation between partners?

Question:

What is the Shari guidance on profit allocation between partners?

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

 

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

 

In principle, partners can mutually agree to any percentage of profit between themselves.

The ratio of profit may differ from the ratio of investment in normal conditions. However, if a partner has put an express condition in the agreement that he will never work for the partnership and will remain a sleeping partner throughout the term of partnership, then his share of profit cannot be more than the ratio of his investment.

The proportion of profit to be distributed between the partners must be agreed upon at the time of effecting the contract.

The ratio of profit for each partner must be determined in proportion to the actual profit accrued to the business, and not in proportion to the capital invested by him.

It is not allowed to fix a lump sum amount for any one of the partners, or any rate of profit tied up with his investment.

 

 

And Allah Ta’āla Knows Best

Mawlana Faraz ibn Adam,
www.darulfiqh.com

 

 


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