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.