The Business Partnership under Islamic Laws


Partnership under Islamic laws

A partnership is usually created where two or more people desire to come to together to form a business.  All Partner of the partnership business jointly share the profit, the losses and decision making.

It is an idol form of business as compare to sole proprietorship. In Islamic point of view there are different modes of partnership business. According to the Muslim jurist, there are four forms of business partnership. They in briefs are as under:

  1. Al-Shirkat al Mufavadha
  2. Shirkat al Anan
  3. Shirkat al Sanaj
  4. Al-Shirkat al Wajooh

Shirkat - al - Mufavadha

In this form of partnership, the amount and type of capital contributed by each partners is equal. The profit or losses has also distributed equally among the partners. Each partner here is an agent as well as helper off the other partners. One of the important conditions of this form is that the partners who carry on the business shall be of equal status. This partnership cannot be form between or among the free and slave person.

There is written agreements among the partners for the equality in sharing of profit or loss. Each partner is an agent as well as helper of the other partners. Each partner in this form of organization has the right to negotiate, enter into contract, purchase, and sell goods in the market. Since a partner, here, represents the firm, so any purchase or sale deed or another business contract signed by one partner will binding on all the partner of the firm.

 Shirkat – al - Anan

In this type of partnership, the capital contributed by the partners is not equal. One of the partners is the major contributor of financial resources. The profit or loss is divided on the basis of capital invested in the business. There is also no compulsion for the partners to be of equal status. This type of partnership can be formed between or among the free and slave persons, Muslims and non Muslims, masters and servants, men, women and children. Here the liability of each partner is limited to the amount he has paid in the business. No partner has the right to lend anything out of the joint assets of the firm.

Shirkat -al - Sanai

This form of partnership is also called Shirkat al Taqqabal. It is an association of different skill involve in the operation of a business. The technicians, the artisans, the laborer, the capitalists, etc. join together in the carrying out of a business. The profit is distributed among the partners according to the terms of agreement among them. It is not necessary that all the partners are pay equally. A person with a better skill will share higher profit than of a non – technical persons/ the profit in fact is distributed according to the amount and quality of work put into the business.

Shirkat - al - Wajooh

In this form of partnership, the persons with high integrity, honesty and reputation join together for carrying on a business on loaned capital alone. They on the basis of high credit rating get loans and start the business the profit or loss is shared among the partners on equal basis.

Termination of Partnership

In all the four forms of partnership stated above, the partners has the right to terminate the contract by giving due notice to the other partners. Partnership also terminated on the death of a partner. However, if the descendants of the deceased wish to continue as partner in the business, they can renew the contract.