The partnership is a form of business that could be possible in Shania’s scenario due to the other individuals showing interest in the business idea. She can create a partnership with one or more persons and sharing of the profits is divided equally, unless an agreement states otherwise (Kubasek, et al., 2015, p. 423). Some of the benefits of a partnership are the ability to raise more capital and to share ownership responsibilities (Block, et al., 2015, p. 9). With committed partners it is possible to have a successful partnership.
General partners manage the business and are subjected to unlimited personal liability as they would be in a general or full partnership. Limited partners have no liability beyond their investment, provided they remain as limited partners. Limited partners may not participate in the management of the business (P. 609). (Rothenberg & Melnikova, 2003)
They can also form a partnership, which is a type of business in which co-owners share the costs and work together to attract customers. As general partners, they would manage the business together and share profits, debts, and obligations associated with it. If Helena and Francine form a limited partnership, they could bring in other limited partners who help fund the
You are a valued colleague and friend of this trio, and they have come to you seeking advice as to how to structure their new business. Please consider the following tax and nontax issues as you recommend
It sounds like her sister, Kelsey, and her neighbor, Carlos, only want an income, but if Shania does not want to figure out payroll taxes then I would consider a partnership with her sister, neighbor and her husband as a silent partner. However, if they want limited liability considering debt then an LLC would be the best one to consider. Because under the structure of an LLC, each member or partner’s liability is limited concerning the debts or legal action of the business (Meggitt, J., 2016).
In order to properly plan the business that John and his wife are considering, they will need to consult a lawyer, multiple suppliers, and the municipal authority of the area. Consulting with these professionals will clarify that their business is created in a manner that protects them from the potential legal implications of taking on a business venture of its magnitude. Consulting a lawyer first would be the way to start. Meeting with a lawyer is necessary for first deciding what type of business they should start and what type of legal protection they are looking for, which in this case a C Corp would be a great recommendation.
This memorandum outlines the various options available to the three persons in the establishment of their business. The memorandum recommends the use of the limited partnership (LP) as the most appropriate business model in the circumstances. This choice, as outlined in the memorandum herein, is informed by the special circumstances that the business is intended to be run and conducted.
Albert and Baker have considered the merits of forming the company as a general partnership, thus a co-ownership of a business for profit. Under the Uniform Partnership Act, hence a model act that codifies partnership law, Albert and Baker’s respective rights to any profits of the company would be an equal share. According to Cheeseman, “Partnership agreements often provide that profits and losses are to be allocated in proportion to the partners’ capital contributions. The right to share in the profits of the partnership is considered to be the right to share in the earnings from the investment of capital” (2007, p. 298). For instance, let’s assume that Albert contributes $50,000 capital, and Baker contributes $75,000 capital and the
I am in the process of designing a business plan for a future bed and breakfast that I would like to open in a couple of years. I would like to purchase some land outside of Austin, TX in order to build this bed and breakfast. I plan on starting this company with a partner, my younger sister, Mercy. We want to know if we should start a general partnership, with both of us as a general partner, or a limited partnership, with me as the general partner and Mercy as the limited partner.
Financially speaking, the duo is better off with the 60/40 split. The S-corporation election allows for income and deductions from the business to flow down to the taxpayers. If Mr. Jones decided to stay a sole-proprietor, he claims the entire $1,200,000 on his Form 1040. If he decides to elect the S-corporation status with a 60/40 split, he claims $720,000 of the business’ income, as well as 60% of the business’
Ownership --------- The type of ownership for the business will be a partnership. This is the most obvious choice as there are two people involved, my business partner and me. A partnership can involve between two and twenty partners allowing for further expansion and more financial backing if needed.
Tim and Tom are interested in inquiring about the possibilities of doing a small business together, a retail shop in this case. The voluntary redundancy package has left the two with $180,000 and $120, 000 respectively. Tim has minimal savings while Tom has $80,000 in bank account, while they require $500,000 for the initial setup. In order to reach a solution, a thorough exploration of all the possibilities is required, gaging every aspect and driving a particular solution.
Another advantage of the partnership entity is that it provides greater access to finance and management from the resources of both partners. As Section 24 of the Partnership Act states amongst its rules of the interests and duties of partners, “All partners are entitled to share equally in the capital and profits, and must contribute equally towards the losses”. Furthermore, the Act states that “Every partner may take part in the management of the partnership business”. Unlike in a sole proprietorship where capital remains limited, partners in a partnership are able to contribute their share in the business to increase capital volume and ultimately business activities. Therefore, the ability to pool resources from partners will, in particular, assist James who just graduated from university and may lack the sufficient funds needed to contribute towards a start-up business. A partnership is also considered a safe organisation for providing credit facilities due to the unlimited liability of partners. Sufficient funds in terms of credit can be procured from financial institutions
This report entails a detailed analysis of how three friends should set up their business. It starts by the definition of a General Partnership (unincorporated) and Limited Liability Company (incorporated). It furthermore goes into the disadvantages and advantages of each as well as the comparison between both. It concludes with a recommendation as to how the friends should set up their business.