It depends on what the silent partner contributes.
The partners receive three kinds of returns from the partnership firm. 1) Remuneration 2) Interest on Capital and 3) Share of Profit[1]
An active person receives the remuneration from the partnership firm. Therefore, as an in-active partner, he/she cannot get the remuneration.
However, he is still entitled to share of profit and interest on capital.
Interest on capital being fixed, the question remains about what should be the share of profit?
This is complete mutual understanding between partners. Therefore, I could only state few parameters upon which you can decide the ratio.
- Normally, profit sharing ratio is equal to the capital contribution ratio.
- The in-active partners also are value addition to the firm, therefore, you need to evaluate the same. An in-active partner does not involve in day-to-day operations, however is part of significant policies and processes. Therefore, you need to see how his or her participation affects the firm in terms of turnover and other aspects like market goodwill, business growth, etc.
If the profit sharing ratio is not provided in the deed, the profit or loss is distributed equally between partners.
The blog mentioned in the footnote is written for partners of LLP, but partnership firm and LLP are treated same for Income tax Purpose. Hence, it is equally applicable to partners of partnership firm.