John Wise and Raul Sanchez decide to form a partnership. Wise will contribute $300,000 to the partnership, while Sanchez will contribute only $30,000. However, Sanchez will be responsible for running the day-to-day operations of the partnership, which are anticipated to require about 45 hours per week. In contrast, Wise will only work five hours per week for the partnership. The two partners are attempting to determine a formula for dividing partnership net income. Wise believes the partners should divide income in the ratio of 7:3, favoring Wise, since Wise provides the majority of the capital. Sanchez believes the income should be divided 7:3, favoring Sanchez, since Sanchez provides the majority of effort in running the partnership business.
How would you advise the partners in developing a method for dividing income?