Practicing Success
When a partnership firm admits a new partner, how is the new partner's share of profits determined? |
Based on the existing partners' profit sharing ratio Based on the capital invested by the new partner Determined through negotiation among the partners Decided by a third-party arbitrator |
Determined through negotiation among the partners |
When a partnership firm admits a new partner, the determination of the new partner's share of profits is typically done through negotiation among the partners. The specific terms and conditions regarding the new partner's profit-sharing ratio are agreed upon by all the partners involved. While the existing partners' profit sharing ratio or the capital invested by the new partner may be taken into consideration during the negotiation process, the ultimate decision on the new partner's share of profits is reached through mutual agreement among all the partners. This negotiation allows for flexibility and takes into account various factors, such as the new partner's contributions, expertise, capital investment, and the overall goals and dynamics of the partnership. |