IN THE ABSENCE OF AN AGREEMENT, PARTNERS SHARE PROFITS
- A. based on activeness of a partner
- B. based on capital contribution
- C. on patronage basis
- D. on equal basis ✓
In the absence of an agreement, partners share profits based on the principle of equal sharing. This means that profits are divided equally among all partners, regardless of factors such as the activeness of a partner, capital contribution, or patronage basis. Equal sharing ensures fairness and equality among partners in a business venture.
When there is no specific agreement in place dictating how profits should be distributed, the default rule is often to divide profits equally among all partners. This approach helps to avoid disputes and conflicts that may arise from unequal profit-sharing arrangements. It also promotes a sense of collaboration and teamwork among partners, as everyone is treated equally in terms of financial rewards.
Equal profit sharing is a common practice in partnerships where all partners are considered equal stakeholders in the business. It reflects the idea that each partner’s contribution, whether it be through labor, capital, or expertise, is valued equally in the success of the partnership.
In summary, in the absence of an agreement specifying otherwise, partners typically share profits on an equal basis to ensure fairness and equality among all parties involved.
