Lane and Hill have decided to form a partnership. Lane is to contribute £150,000 as capital and Hill £20,000. Hill is to work full time in the business and Lane one day a week. Because Hill has no other income, she anticipates making drawings of £1,000 per month from the partnership. Lane expects to make drawings of about £1,000 per quarter.
You have been asked to advise the partners on how to share profits in such a way as to compensate each of them for their unequal contributions of capital and labour and withdrawals.