In the absence of an agreement among the partners to the contrary, profits will be shared on the basis of percentages of capital contributions
What is Profit Sharing Agreement?
- A contract that specifies the ratio you will use to share earnings and losses with the other partners involved is known as a profit-sharing agreement.
- The investment each partner made can be used to calculate this ratio, or you can have a contract that merely divides the profits and leaves you in charge of the losses.
- Whatever the case, before forming a partnership, all partners must sign the profit-sharing agreement. The terms and obligations of each party are outlined in this agreement! According to the Partnership Act of 1932, regardless of the proportion of the partners' interests, profit and loss must be shared equally in the absence of any agreement between partners.
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