0Guarantee of specific profits to a partner by the firm or any one or more partners is to attract a qualified professional into partnership to capitalize his/her skills or reputation earned by him/her to the advantage of the firm.
A specific clause is agreed in the partnership deed whereby guarantee of profit is specified.
Ex:
A, B and C are partners sharing profits and losses equally. Partner C is guaranteed with a minimum share of profit of 50000.
Suppose that the profits for the year 2017-2018 is 120000. Each partner shall get 40000 as profit share. However, C shall get 10000 more to attain min guaranteed profit of 50000. Thus A and B sacrifice 5000 each from their respective share of profits earned. Below is the final share of profits credited to each partner
A 35000
B 35000
C 50000
Hope this topic is easy to understand.
Regards
VIJAYAKUMAR V
