Question

Sharing of profit is a prima facie evidence of existence of partnerShip but it is not the conclusive evidence . Discuss with suitable example

Answer 1

The answer is as follows:

Explanation:

• It is true that sharing of profits of a business is a vital element to establish a partnership. But it is only prima facie evidence and not conclusive evidence of the existence of a partnership.  

• It is also correct that the partners decide to share the profits of a business which is carried on by all or by one of them acting for all.  

• However, the allocation of profits would not by itself make such a person partner with the person bearing on a business.  

• Sharing of profits by the following person will not make them partners in the alliance firm:

• (i) By a moneylender to persons engaged or about to engage in any business;

• (ii) By an agent or servant as remuneration.  

• (iii) By widow, child, or a late partner as an annuity, or

• (iv) By a prior owner or part-owner of the business as deliberation for the sale of goodwill or share thereof.