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Simple English definitions for legal terms
distribution of profits
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A quick definition of distribution of profits:
Distribution of profits: When a group of people work together to make money, they need to decide how to share that money fairly. This is called the distribution of profits. For example, if a group of friends start a lemonade stand and make $10, they might agree to split the money equally, with each friend getting $2.50. In a bigger business, like a company or partnership, there is usually a written agreement that outlines how the profits will be shared among the members or employees.
A more thorough explanation:
Distribution of profits refers to the allocation of profits among partners of a partnership, members of a Limited Liability Company (LLC), or employees in a company, according to the terms specified in a profit-sharing agreement.
- ABC Partnership has three partners, and they have agreed to distribute profits equally among themselves.
- XYZ LLC has five members, and they have agreed to distribute profits based on their ownership percentage.
- XYZ Corporation has a profit-sharing plan for its employees, and the profits are distributed based on the employee's salary and years of service.
These examples illustrate how profits can be distributed among partners, members, or employees based on the terms outlined in a profit-sharing agreement. The distribution of profits can be equal or based on ownership percentage, salary, or years of service.