Let's assume that the parties Reuven and Shimon have agreed to organize a partnership to sell childrens' shoes. They now have to decide upon their investment. The investment of the parties can be in money or in anything that the partners consider to be the equivalent of money. The most common way is for both Reuven and Shimon to invest, let’s say $100 each. Or if Reuven has already been in the business and has $60 worth of childrens' shoes, they may agree that Shimon will put up $100 and Reuven will give his $60 worth of shoes to the business and add an additional $40. There is almost an endless number of possibilities how to organize the partner- ship.
The parties are in business to make a profit and they should at the outset set forth in their agreement how the profits and losses, if any, shall be divided.

The parties may stipulate any division of profits and losses as they please. For example, they may agree that Reuven who has invested the shoes and $40 in the partnership should receive 80 percent of the profits and bear 15 percent of the losses, while Shimon who has invested $100 should receive 20 percent of the profits and bear 85 percent of the losses. If they so agree, there is a presumption that they did so to take into account their respective business talents and other factors. In the example given, Reuven obviously has more to offer the partnership than Shimon in the way of talent. This assumes that both Reuven and Shimon will work the same hours for the partnership.

In the absence of any agreement, they will share equally the profits and losses according to how many partners there are. For example, there are four partners. Reuven invests $100, Shimon invests $200, Levi invests $300, and Yehudah invests $400. The partnership makes a profit of $1,000. Each partner will receive $250 from the profits. If there is an $800 loss (without the entire investment being lost), each will bear $200 of the loss (Reuven will pay in an additional $100). If the entire investment is lost, then each partner shares the loss to the extent of his investment. In the event that the partnership loses more than the $1,000 invested by the partners, the partners share proportionately in such losses that exceed their investments.
If the funds invested by the aforesaid partners have not yet been put to use in the business of the partnership, and the money appreciated in value because of deflation or because of changes in exchange rates of currency, then the increase is shared proportionately to their investment. Thus if in the prior example, there was a $100 increase in the value of the $1,000, Reuven will be credited with $10, Shimon will be credited with $20, Levi will be credited with $30, and Yehudah will be credited with $40. The same applies to losses through inflation or exchange currency rates. Similarly, there is an opinion that if the value of the partnership increased not through the efforts of the partners but because of appreciation of the assets, then this appreciation is divided according to the proportion of the investment of the partners. For example, Reuven invests $400 and Shimon invests $200. They purchase real estate for development for $600. The land appreciates to $1,000 and they sell the land rather than develop it. Reuven will be entitled to $666.67 and Shimon will be entitled to $333.33. However, if they develop the land and then sell it for $900. Reuven will be entitled to $550 and Shimon will be entitled to $350, each receiving one-half of the profits.

There is an opinion that the partners share proportionately in any profits or losses occurring after the termination of the partnership. For example, the aforesaid partnership involving the four partners was to last from July 1, 1990, to June 30, 1992. As of June 30, 1992, the partnership earned $1,000 in profits. Thuseach partner will receive $250 from these profits. The public continued doing business with the partnership from July 1, 1992, to July 31, 1992, and the partnership earned an additional $100 in profits during that month. Reuven will receive $10, Shimon will receive $20, Levi will receive $30, and Yehudah will receive $40from the July 1992 profits.
In case of casualty losses not due to the operation of the business, such as fire losses or theft, the partners share such losses in proportion to their investments. This assumes that there is no insurance to cover such losses.

Assuming Reuven and Shimon each agree by a kinyan to invest $100 in the partnership. Reuven invests his $100 and Shimon delays in investing his $100. The partnership earns a profit on the investment and efforts of Reuven. Shimon claims his share in the profits, pleading that he is an equal partner. Shimon will prevail since he is a partner. However, at any time prior to Reuven making any efforts on behalf of the partnership, Reuven may make demands upon Shimon to invest his $100, or he may sue Shimon in Beth Din to enforce their agreement. (In the latter situation. Beth Din will order Shimon to invest his $100.) If Shimon, after demands by Reuven, refuses to invest his money, or if he makes it necessary for Reuven to sue him in Beth Din to compel him to invest the $100, then Shimon is not entitled to the profits earned by Reuven on the money he had invested in the partnership prior to Shimon investing his $100. Reuven and Shimon have both undertaken to participate in the business of the partnership. Assume that a proper kinyan has been performed or other procedure has been followed to set up a legally binding partnership, such as complying with halachah or local custom or local laws.

Thereafter, Reuven refuses to participate in the business of the partner- ship. Shimon has the option of terminating the partnership, or of continuing the business of the partnership and hiring Levi to take Reuven's place and deducting Levi's salary from Reuven's share of the partnership profits, or of continuing the business and deducting from Reuven's share of the profits an amount to be fixed by Beth Din. If the share of the profits to be allocated to a partner is determined by the anticipated time to be spent working for the partnership, then such amount will usually be controlling. For example, there are four partners: Reuven, Shimon, Levi, and Yehudah. It was agreed that Reuven need not participate in the operation of the partnership.Shimon, Levi, and Yehudah will each receive 30 percent of the profits of the partnership and Reuven, the non-worker, will receive 10 percent. Thus each working partner receives 20 percent more of the profits than the non-working partner. Thereafter, Shimon, too, does not participate in the operation of the partnership.The partnership profits will be distributed as follows: Reuven and Shimon will receive 15 percent each and Levi and Yehudah will receive 35 percent each.

Before the partners spend partnership funds, the best thing is for them to agree how moneys should be spent and reimbursed or advanced. Absent an agreement, the partners may use partnership funds for the business of the partnership. They may take funds for transportation and meals and lodging while on partnership business. If one of the partners uses his own vehicles for transporting partnership merchandise or stores merchandise belonging to the partnership on his own premises, he is entitled to be reimbursed. Unless otherwise agreed upon, the partners may take funds from the partnership for their own personal use for clothing, food, and other items until any of the other partners objects. Such money taken from the partnership is not deemed part of the share of the partner making such withdrawals.

The subject matter of this lesson is more fully discussed in Volume VI Chapter 176 of "A Restatement of Rabbinic Civil Law" byE. Quint, published by Jason Aronson, Inc. and on sale at local Judaica bookstores. Questions to quint@inter.net.il

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