I am the financial backer of the business. My partner does all the work related to the buying and selling of the goods. He deducts expenses (petrol, advertising costs, bank charges etc) before we share the profits.

Question

I have a business partnership with a Muslim friend in which I am the financial backer of the business. My partner does all the work related to the buying and selling of the goods. He deducts expenses (petrol, advertising costs, bank charges etc) before we share the profits. We agreed that as my partner does all of the work related to the business he should have a larger share of the profits (70%).

He does out of his share of the profit pay for Internet access and mobile/landline phone bills, which are naturally used for both the business and his personal use (total is between 5-10% of the total profits after deducting expenses).

He has just today informed me that he in addition takes out a weekly wage, which I was not aware of and never agreed to. He explained that islamically this is correct for him to do so, as he has done the work (i.e. the buying, selling, travelling etc).

Could you please clarify whether this is in accordance with the Shariah, considering that he is already getting the larger percentage of profits as a consequence of him doing the work.

Mufti Ebrahim Desai · Accepted Answer

You have entered into a Mudhaarabah contract with your friend. You provide the finance and your friend provides the service and both of you share the profits on an agreed percentage.

A Mudhaarabah contract is different from a normal partnership where both partners make a financial contribution. In that instance, the working partner could draw a salary. That is not the case in a Mudhaarabah contract. The Mudhaarib (worker) is not entitled to a separate wage. The weekly drawings must be deducted from his share of the profits.

and Allah Ta'ala Knows Best

Mufti Ebrahim Desai

Question

Answer

People also ask

Related fatawa