Partnership Agreement and Partner's Entitlements

Partnership is an association between two or more persons who agree to carry on a business for profit. A partnership agreement is a legal document that outlines the terms and conditions of the partnership, including the rights and responsibilities of each partner.

In the absence of an agreement, partners are entitled to certain entitlements. Let's discuss these entitlements in detail below.

Interest on Loan and Advances

Partners are entitled to interest on the capital they have invested in the partnership and on any loans or advances they have made to the partnership. The rate of interest may be specified in the partnership agreement or may be determined by law.

Salary

Partners are not entitled to a salary. However, if the partnership agreement provides for a salary, partners are entitled to receive it. The partnership agreement may also specify the method of calculating the salary.

Commission

Partners are not entitled to a commission. However, if the partnership agreement provides for a commission, partners are entitled to receive it. The partnership agreement may also specify the method of calculating the commission.

Profit share in capital ratio

In the absence of an agreement, partners are entitled to share the profits and losses of the partnership in the capital ratio. This means that each partner's share of the profits and losses is determined by the proportion of their capital contribution to the partnership.

Conclusion

In the absence of a partnership agreement, partners are entitled to interest on their capital, and any loans or advances they have made to the partnership. They are not entitled to a salary or commission. The profits and losses of the partnership are shared in the capital ratio.