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Partnership and Running Costs

Answered as per Hanafi Fiqh by CouncilofUlama.co.za

Q: I want to do a busines partnership with somebody where he is financing the entire business by buying the equipment and stock. I wil be runing the business. We want to share the profits 50/50. Are we both responsible for the running costs like rental, etc.?

A: You have entered into a transaction of mudarabah. The money that your partner has invested will be the capital. The running cost of the business will be paid from the profits and not from the capital. After paying the running cost the remaining profit may now be shared according to the agreement. If the running costs exceed the profits then only should it be paid from the capital.

This answer was collected from CouncilofUlama.co.za, which is operated under the supervision of Council of Ulama Eastern Cape, South Africa.

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