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ACCA Applied Skills · Corporate and Business Law (Global) · Partnerships

Amara and Bao begin trading together as a general partnership selling furniture, intending to share profits. They have signed nothing and have not discussed how profits will be split. Under the default rules applying to general partnerships in the Global variant of LW, how will profits be shared?

Profits are shared equally. When partners have no agreement on profit sharing, the default rule treats each partner as entitled to an equal share, regardless of how much capital each contributed or how much time each spends working.

  1. AIn proportion to the capital each contributed
  2. BEqually between themCorrect
  3. CIn proportion to the time each spends working in the business
  4. DAs the partner with the larger experience decides

Explanation

Where the partners have made no agreement on profit sharing, the default rule is that profits and losses are shared equally, regardless of capital contributed or time worked. Capital-based or time-based sharing would need an express or implied agreement.

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