Dental partnership agreement

The arrangement in the queried scenario is not permissible. In a partnership, the expenses are first settled from the income accrued. The nett profit will then be divided between the two partners on a 50/50 basis, since they have enacted a partnership on a 50/50 basis.

Yes, if dentist ‘B’ wants to allocate an extra percentage of the profits to dentist ‘A’ in lieu of his work, then doing so is permitted. Since dentist ‘B’ is a silent partner as understood from the query, and dentist ‘A’ is an active partner, dentist ‘B’ can take 25% or 30% of the profits as his share, and dentist ‘A’ will take the remaining 75% or 70% as stipulated and agreed upon by both partners. However, in this instance too, the nett profits will be shared after settling all expenses (according to the stipulated percentages).

Although the profit will differ due to one partner being an active partner and the other being a silent partner (as explained above), the shareholding (of both partners) will not change. Both partners still remain equal partners in the practice itself, due to both of them investing on a 50/50 basis. It is only the profit sharing ratio that will differ due to one partner being active and other being silent. If at any stage the partnership suffers a loss, then the loss will be shared between both partners equally.

We hope that the above explanation clarifies the matter.