Partnershpi

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This discussion clarifies how profits are distributed in a partnership when partners haven't contributed capital according to their shareholding. It explains that the partnership deed or mutual agreement dictates the order of payments, which typically prioritises capital withdrawal based on shareholding, followed by interest on loans, and then remuneration or salary. The general principle is that capital contributions are addressed first, but specific clauses in the partnership agreement can alter this order.

CA1

CA1 (Querist)

24 September 2021 If multiple partners in firm has not contributed capital as per share holding, do they get share of profit when distribution of revenue NORMALLY or does capital first have to be returned to other partners who have contributed as per shareholding ? What is the order of payments (which one is to be paid first) in a partnership to partners in regards to Capital ? Advances ? Interest ? Renumeration ? Salary ? Profit ?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

24 September 2021 For withdrawal of Capital amount the preference is given to the one who have bigger chunk of share. Interest would be paid only over the loan amount. For remuneration etc. no such restriction applies. Moreover, check any such restrictive clause in the Partnership deed.

CA1

CA1 (Querist)

24 September 2021 Which section speaks about this ?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

24 September 2021 It works on mutual understanding of the partners, which is either incorporated in the deed or mutually agreed upon.

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