Working and Sleeping Partners

Sleeping partners are defined in the partnership agreement itself. The general definition of partnership is as follows, ‘When two or more people come together with a purpose of business to make a profit it is called partnership.’ The partnership is a very key topic in the competitive exam. The questions in this section cover a variety of topics from ratio and proportion, profit and loss, etc. One of the types of question asked in this topic is based on working and sleeping partners.

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Working and Sleeping Partners

In many businesses, you will see that the partner that is working is called working partner. While the other partner is sleeping or he is silent so he is called sleeping partner. The sleeping partner only invests the money, he does not do any managerial work or administrative work. He is not involved in the day to day works of the company. The working partner manages the business and hence get paid in the form of salary or remuneration for it. While the profit is being distributed, the salary part has to be met first, any profit remaining after this can be divided on the basis of the ratio of the partner’s investment.

Sleeping partners

Source: PxHere

A look into few of the solved examples based on the topic asked in the exams will help you with the better understanding.

Browse more Topics under Partnerships

Solved Examples:

Q. Raghav, Rahul, and Roma started a business with an investment of Rs. 12 lakhs, 8 lakhs, and 5 lakhs respectively. Raghav and Rahul are also working as CEO and Director. They get a fixed monthly salary of Rs. 37,000 and Rs. 28,000 respectively out of the profit that the company makes. Find out the earnings of Roma. The company makes the profit the of 21 lacs at the end of the year.

A. Rs. 2,64,000                  B. Rs. 2,55,000
C. Rs. 2,66,000                  D. Rs. 2,70,000

From the question, you can derive that Raghav and Rahul are the working partners. Thus they will also be compensated with the fixed salary every month besides their shares in the profit. While Roma is the silent partner. She will only get her part of profit based on the ratio of her investment.

The share of investment of Raghav, Rahul, and Roma is 12: 8: 5. So, the share of Roma’s profit will be 5/25. But before calculating her share we need to deduct the yearly salaries of Raghav and Rahul.
Raghav’s yearly salary: (37000 x 12) = Rs. 4,44,000
Rahul’s yearly salary: (28000 x 12)
= Rs. 3,36,000

Thus, remaining profit after the deduction of their salaries will be, 21 – (4.44 + 3.36) = Rs. 13.2 lakhs.

So, Roma’s share will be, (5/25 x 13.2) = Rs. 2,64,000. Thus, the correct answer is A.

Example Of The Percentage Of Salary

Q. Raj and Sanjay are partners in a business firm. Raj puts in Rs. 5000 and Sanjay put in Rs. 6000. Raj receives 12 1/2 % of the profit for managing the business and the balance is divided in the ratio of their capitals. If the total profit is Rs. 880, find Raj’s total share.

A. Rs. 470           B. Rs. 465                    C. Rs. 460                   D. Rs. 455

As Raj is managing the business he is the working partner, while Sanjay is the sleeping partner. Raj gets his share of profit and 12.5 % for managing the business. 12.5 % of 880 is 110. So, Raj gets Rs. 110 and the other profit as well. This profit will be based on the ratio of their investment. Their investment is in the ratio of 5: 6. Thus, the share of Raj in profit is (5/11 x 770) = 350. So, the total gain for Raj will be 110 + 350 = Rs. 460. Thus, the correct answer is C.

 Learn Simple and Compound Partnerships here. 

Practice Questions:

Based on commission

Q. A business has four working partners and twelve sleeping partners. After paying equal commitment to the working partners, 80 % of the profit remains and it is shared among all the partners. If each working partner gets a total of Rs. 12000, find his commission.

A. Rs. 4000                           B. Rs. 5500
C. Rs. 6000                           D. Cannot be determined

The correct answer is C.

Q. The profit after a year of starting the business was Rs. 2,30,000. If there were three working partners and each of them received a commission of 5 % and two sleeping partners, and all the partners have invested equally, find the share of the profit earned by a silent partner.

A. Rs. 28000                  B. Rs. 38000
C. Rs. 38500                  D. Rs. 39100

The correct answer is D.

Based on salary paid

Q. Aman and Shardul decided to start a business. They both invested Rs. 50000 and Rs. 60000 respectively. As Aman was managing the business, he was paid Rs. 5000 per month as the salary. After a year, both profited Rs. 93000. What was the total amount Shardul received?

A. Rs. 1800           B. Rs. 1600             C. Rs. 6000                D. Rs. 5000

The correct answer is A.

Q. The commission paid to the working partner in a business is 5 % of the profit. Two working partners are paid Rs. 20000 each. The remaining profit is shared equally among the four partners. Find the amount paid to each sleeping partner in the business.

A. Rs. 10000                        B. Rs. 15000
C. Rs. 55000                        D. Rs. 90000

The correct answer is D.

Q. The three partners A, B, and C decided to run a business together. All of them invested Rs. 20000, Rs. 30000 and Rs. 60000 respectively. B is the CEO and he manages all the work. The other two are sleeping partner. If B receives 3000 per month as a fixed salary and the total profit made by all of them was Rs. 1,35,000 in one year, then what was B’s total share of the profit?

A. Rs. 63,000                     B. Rs. 59,000
C. Rs. 65,000                      D. Rs. 72,000

The correct answer is A.

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