There are two business partners who put money into their business equally. Their names are $Samir$$ and $Ahmad$$. $Samir$$ says to $Ahmad$$ that he gets his goods (say, a batch of copper) from abroad at the price of 60 dollars per batch and $Ahmad$$ agrees with this. In reality, $Samir$$ gets this one batch for 40 dollars and sells it to his customer for 100 dollars. Therefore, each partner gains 20 dollars in profit from selling one batch (however, in reality $Samir$$ gets 40 dollars from one batch in profit). At the same time $Samir$$ and $Ahmad$$ agreed that all the transportation costs, money delivery costs as well as other petty costs are paid by $Samir$$. Financial risks are also taken by $Samir$$. The only thing $Ahmad$$ is doing is his participation in equal capital sharing. $Samir$$ is responsible for all the things related to business. Is it permissible for $Samir$$ to act as he does (by profiting 20 dollars more than $Ahmad$$)?

All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad is His slave and Messenger.

This partnership is unlawful because one of the conditions for a valid partnership is that the profit and loss are equally incurred by the partners. Now, if one of the partners stipulates that the loss be inflicted only on the other person, then this partnership contract is corrupt, hence invalid. In fact, the partner is trusted and is not asked in the Sharee’ah to compensate any loss unless there is neglect and bad management on his part. Now, if any of the partners works in the company, he is given a salary similar to that given to anyone doing the same job. Anyway, the benefit and the loss should be borne equally by both parties.

Allah knows best.