Question

Could you kindly explain to me about a partnership where one partner invests alot of money into it? When they divide the profits based on agreement made, does the investor partner only get a percentage too like the other partners or will they get back the money they invested too? I am so confused on this process.

Answer 1

There are many factors considered while the Partners agree for the Profit sharing Ratio. Below are the Points which need to be Noted-

• In a Partnership or any business, Money is one of the important factor in order to run the business. But its also true that this is not the only factor to order to run a business. It requires Skilled Employees, Specific Qualifications and talent etc, So Only capital is not considered while deciding the Profit ratio.
• If a partner has invested alot of money , other partners can agree to pay the interest on the excess Capital instead of give more Profit share.
• It is Possible that the Partner who is investing in the business may not be active involved in the operations of business like other partners
• If the Partners has Personal relationship, it can also be deciding factor.

So Profit Sharing ratio is decided considering various circumstances and it depends on case to case and negotiation