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Reuven offers Shimon 1 million dollars and in return REuven gets a 15% royalty and 10% ownership in the company.
Situation a: Reuven receives the royalty until he has earned 2 million dollars then the royalty goes away.
Situation b: Reuven gets the royalty until Shimon has repaid the 1 million then the royalty goes away.
Are either of these situations considered ribis and are they permissible?
This is how I see the cases. Feel free to correct me if I’m wrong.
One thing to make clear before we start is that interest doesn’t apply to a sale; it only applies to a loan (throughout BM 5). To buy something on credit is equivalent to a loan (5:2); to buy something overpriced or underpriced significantly falls under the laws of ona’ah, for which if all parties are aware of the fact that one is getting cheated and they proceed with the sale anyway, the sale is binding (BM 4:3-6).
Situation a: Investor purchases an entity that makes him money plus interest. He is making a purchase of stock that will ultimately make him much more than what he paid. That’s not a loan; that’s a proper sale. Since those were the terms from the outset, the sale is binding with no prohibitions.
Situation b: The investor lends money and makes interest off of his money until the loan is paid off. This is literally how banks make their money. This is an issue of paying interest and would require a heter iska to be allowed.
