Partnership agreements at the start of collaborative busines

Querist : Anonymous (Querist) 09 February 2010 This query is : Resolved
Partnership agreements at the start of any collaborative business venture.

I'm going into business with my best friend and want to protect our friendship.

I am going to invest 100% in stock market and heis going to do trade , how to do understand partnership , whether it should be 80-20 %

Total Investment mine and his investment nil

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Raj Kumar Makkad (Expert) 09 February 2010
You can execute partnership deed mentioning therein entire details of your business and share of both the partners in terms of investment and profit.

Querist : Anonymous (Querist) 09 February 2010
Another reason to consult advisors is to avoid tax surprises. If one partner contributes cash and another contributes intelligence

B K Raghavendra Rao (Expert) 09 February 2010
Whatever be the contribution of partners towards corpus funds, the question of income tax becomes applicable only the income derived by the partners from that business. As such, tax is to be paid by each partner to the extent of profit he receives.

Regarding sharing, it is up to you and your friend to decide upon the ratio of sharing the profit/loss. It could be 80-20, 70-30, 60-40 or 50-50 but let it be friendship-understanding.

soumitra basu (Expert) 12 February 2010
In my opinion the share of profit should be equal. No income tax shall be payable by the partners on the share of profit receive from the firm. However, Remuneration and/or interest on capital shall be taxed in the hands of the partners. Since you are only investing in addition to share of profit and remuneration you should receive interest on capital.

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