While many Muslims engage in partnership commercial enterprises, they remain
ignorant of the Shar’iah’s rules essential for a valid partnership (shirkat)
The proceeds acquired from an invalid partnership are akin to riba. It is,
therefore, necessary for the partners in a business to acquaint themselves with
the Shar’i rules pertaining enterprise.
The following are some salient features of a
valid Islămic Shirkat (partnership):
Each partner represents the others.
All partners (active as well as inactive) are equal responsible to the creditors
The proportionate profit-sharing of the partners must be agreed on prior to the
commencement of activities.
No specific sum may be agreed for any particular partner. Thus, wages cannot be
arranged for a partner in lieu of his greater services. However, his share in
the profit could be increased.
The capital investment of partners need not be equal. Profit-sharing may be
unequal even if capital investment of the partners is equal.
All partners, active and inactive, share in both profits and losses.
The capital of any particular partner cannot be guaranteed.
Partners bear loses in proportion to their shares in the profits.
Any cash or goods taken from the partnership will be against the profit of the
partners taking the items.
The joint assets cannot be used by any partner without the consent of all
Death dissolves the partnership in relation to the deceased. On the death of a
partner it is Wăjib for the other partners to immediately assess the standing of
the business and to determine the assets of the deceased so that his property
could be made over to his heirs.
Article taken (with Thanks) from Attarbiyah