In a partnership, how are profits typically shared?

In a partnership, profits are commonly shared based on the capital contributions made by each partner. This means that partners who invest more capital into the business typically receive a larger share of the profits, reflecting their investment and risk in the partnership. This method aligns the financial interests of the partners with their contributions to the overall business.

While it's possible for partners to agree on different arrangements for profit sharing, such as equal distributions or performance-based sharing, the default assumption in most partnership agreements is that profits will correlate with the amount of capital each partner has contributed. Thus, understanding the capital contribution model is essential for grasping how profit distribution works in a typical partnership structure.