Sharikah
Sharikah is two or more people combining capital or labor in a joint venture, sharing its profit and loss between them.
What it means for me: What makes a sharikah lawful is genuine, shared exposure to loss, not just a share in profit if things go well. A partner promised a fixed return regardless of outcome has moved into a different, riba-adjacent arrangement, not this one.
Example: Two friends open a small shop, one contributing the capital and the other running it day to day. They agree to split any profit by a set ratio, and to share any loss the same way.
Do not confuse with: Mudarabah, a partnership of capital and labor. In the common form of sharikah, both partners contribute capital. In a mudarabah, only one side puts up money while the other manages it.
If scholars differ: The Hanafi and Hanbali schools recognize a partnership of labor alone, without any shared capital between the partners. The Shafi'i school does not recognize this form, holding that a valid partnership needs shared capital.
Related terms
See the term in context
What is the ruling on a partnership in which one party contributes two-thirds of the capital and the other contributes the remaining one-third while performing all the work, on the condition that the profits are equally shared? And is this partnership considered a company of bodies (Sharikat al-Abdan)?
This transaction is permissible, combining partnership (sharika) and profit-sharing (mudaraba). It is closer to mudaraba, as it involves two sums of money and the labor of one owner. Ibn Qudamah said: "As for the…
What is the ruling on paying an amount as a down payment for a relative's car, provided that the amount is paid in monthly installments, and the remainder of his earnings is divided equally, and if the car is sold, the down payment is recovered and the sale price is divided equally? And what is the ruling on registering the car in the relative's name?
The described transaction is not valid, neither as a Mudarabah (profit-sharing partnership) nor as a Sharikah (general partnership). As for Mudarabah, it is because it is an exclusive trade, and its contract is not…
Is selling air conditioners in installments at a fixed price, and contributing shares worth 1000 Riyals to distribute fixed profits based on sales, considered haram or usury?
There is no objection to selling on credit with an increase in price, nor to Mudarabah (profit-sharing) according to Islamic law, where the capital owner gives a portion of his wealth to someone to trade with it, on the…
Questions that use it
What is the meaning of the Talbiyah, "Labbaika Allahumma Labbaik, Labbaika La Sharika Laka Labbaik, Innal Hamda Wan Ni'mata Laka Wal Mulk, La Sharika Lak," and what is its benefit?
Is it permissible to mix personal funds with the funds of a joint commercial project while recording all transactions in a ledger, and can one dispose of the project's personal funds as long as it is clearly recorded in the ledgers?
Is it permissible in Islamic law for a limited partnership (sharikat al-tawṣiyah al-basīṭah) that a limited partner (al-sharīk al-mawṣī) bears a share of the loss not exceeding the amount of their capital, which may lead to the general partners (al-shurakāʾ al-mutadāminīn) bearing a share of the loss exceeding their proportion of capital contribution, and that the limited partner’s share of the loss is less than their proportion of capital contribution? Or must the proportion of loss borne by all partners be equal to their proportion of capital contribution? And what is the ruling on the partnership in the event of impermissibility?