Business Structure And Potential Legal Issues

| The partners are jointly and severally liable for business debts and obligations. The partners are held personally responsible for the business and may be sued personally for liability. Partners’ personal assets are subject to lawsuit(s) made against the business. Lack of continuity; death of a partner may end the partnership/business if a buy/sell agreement is not in place. Disagreements may be difficult to resolve.

Due to its nature, partnership is generally liable for the acts of the individual partners if committed in the course of the partnership business. However, liabilities of every partner may be regulated by the written agreement signed by partners. If no written agreement is signed by partners, liabilities of the partnership are regulated by the Partnership Act. If one of the partners retires, he or she may not be liable for the future debts of partnership if an official notice of the change is sent to creditors and the public. However, there were no official notice sent by the partners in the case; therefore, Toby may be liable for the debts of partnership. Due to the death of the third partner, partnership may be dissolved. In order to pay off the debts, assets should be sold and partners are free to continue the same kind of business after the dissolution of the

Many believe that liability is a biggest issue in a general partnership than in a sole proprietorship. The owners of the company are still fully liable for any debts the company may accrue as well as the liability for any lawsuits that may be brought against the company. However, the bigger issue in a partnership is that now each partner can be liable for the other partner’s actions. If one partner is sued for malpractice, the other partner may suffer because of it.

When it comes to partnerships Alex, Bill, Carl, and Devon will have two options- a general partnership or a limited partnership. Partnerships are beginning to be a business form of the past. Once upon a time, partnerships were “the default form of business and provided the benefit of pass-through taxation, but lacked the important feature of limited liability” (Chrisman, 2010, p. 465). In a general partnership, each partner associated with the entity will be held liable for their own business decisions as well as

Liability All liabilities are the responsibility of each partner. In the event of litigation, any creditors can go after the personal assets of each partner to recover any debt owed. But since liability is spread out between the owners, one may feel less risk is being taken. 2. Income Taxes General partnership may also benefit from pass-through taxation, meaning the partners are taxed like sole proprietors. Business income is reported on the personal tax filing while business losses can be deducted to reduce personal tax liability. The partnership itself is not subject to federal income tax. However the partnership needs to file an information return utilizing the IRS Form 1065. 3. Longevity or continuity of the organization Once the partnership agreement is fulfilled, the general partnership may dissolve. A buy/sell agreement may be included in the articles of the partnership to allow the

Even if the term of the Partnership has not expired, the Partnership may terminate by: (a) Unanimous agreement of the Partners; or (b) If Can Do becomes significantly incapacited; or (c) Election of a Partner when another Partner has breached this agreement.

It would also be beneficial to set up a limited liability company. (LLC) A LLC limits the partner’s liability to your basis in the company

a partners that might end or dissolve partnership. One of the main drawbacks of a

Under the rules found in section 708, a partnership may terminate for federal tax purposes but continue legally. To constitute as a technical termination, an exchange of 50% or more of the interests in capital gains and profits must occur within 12 months. Once terminated, the partnerships’ assets and liabilities are viewed as having transferred to the new partnership in exchange for an interest in it. Immediately after, the ceased partnership is regarded as having dealt its newly acquired interests to the purchasing partner and the remaining partners. Say for example, if Jack and Jill each contribute 20,000 to form a partnership and a few years later Jack decides to sell his entire 50% stake to Jenny for 30,000, Jack and Jill are now seen

In order to have a partnership, you must create an agreement of the parties, the formation of a unified action to a for-profit business partnership. The parties must decide its proportionate share of investment, in order to determine the revenue and profit, will pay and receive. Partners have unlimited liability partner the relationship of debt.

* The ownership of the partners is dissolved and they become mere employees who are responsible to the shareholders and Board of Directors

Not every partnership ends in hostility. Just a some marriages end in death, or even in friendship, the same is true in the business world. It seems strange to start your business with a view of the end, but Crystal Stranger, president of 1st Tax and author of The Small Business Tax Guide, says, "Exit strategies should be a part of any business plan and founders should create agreements about what will happen in this case before getting too far into doing business together." This included the division of assets, assignment of clients, and compensation for the partner (or their estate) who leaves.

Firstly, even though there are different types of partnership such as general, limited and limited liability partnership. This three different type has its advantages and disadvantages however we will be mainly focused on general partnership. One advantage of the general partnership is raising capital due to the nature of the business the partners will raise capital to start-up the business. Therefore more partners mean more capital can be put to the business, this allows the business to have more potential for growth and profitability. Another advantage is that a partnership is less complicated to form and run than a company they don’t have legal filing requirements, this means they don’t have to file accounts and documents with Companies House.

When Haili and John registered a proprietary company or form a partnerships, there are some legal rules and regulations attached to each of the type. To face those rules and regulations appropriately, a proper consideration is required by the each party.They have to know that a proprietary company is a smaller form of a public company when a partnerships is a form of organization when two or more people gather and do a business together (Pearce 2015). Consideration from the party comes from the management of the company and the willingness to use their personal debts. When Haili and John wants to be a director of Sparkle Pty Ltd, they can form a partnerships or a proprietary company. A proprietary company is a small company under the Corporations act 2001 (Cth), thus a partnership is only bind under The Partnership Act 1985. If Haili and John wants to manage the organization and be liable for the debt that arise from the organization, they can form a partnerships. Therefore, a proprietary company is separate legal entity and the amount of each party are liable for only the number of shares they own on the company (Pearce 2015). There is another form of partnership called limited partnerships that the members can have limited liability but cannot manage on the partnership (Pearce 2015). According to Seago and Horvitz (1980), a partnerships may have a characteristics of minimum 2 or more members and each party is a liable party if the partnerships goes

• Companies can gradually separate a business from the rest of the organisation, and eventually, sell it to the other parent company. Roughly 80% of all joint ventures end in a sale by one partner to the other.