Joint equity business partnerships
24 Aug 2011 10:51 GMT
 
My brother and his friend are in the process of setting up a small business together. They wish to draw up a contract between themselves with regards to the business. They are 50/50 partners in the business and are hoping you could give them some guidelines on setting up a business contract in conformity with the Islamic Law.

Answered by

Sheikh Husayn al-`Ubaydî

There are different types of legitimate partnership in Islam. There forms of partnership are: al-`Anân, al-Mudârabah, al-Wujûh and al-Abdân.

If the form of partnership between the two of you is by each partner supplying half the capital and splitting the profits equally, then this would be a legitimate form of partnership in Islam. This is called an `Anân partnership.

The following guidelines must be observed:

The two shares in the capital investment must be known and fully disclosed. The profit that each party receives should be a certain fixed percentage such as a quarter, a half, a third, etc. Alternatively, the profit may be calculated according to the percentage contribution of each partner.

If these conditions are met, then this will be a legitimate partnership contract.

Source: Islam Today



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