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Case Analysis : Business Partnership

Decent Essays

While many companies are formed by investors, best friends, or family members it is always a good idea to register the company and make it a legal partnership. Partnership agreements serve several purposes, but mostly it will benefit all parties involved. In this scenario, assuming Chad wants equal decision making rights but not the liability of the company’s debt LLP is a good option to register the company under, also assuming that Dad wants the same for his son Chad. For instance, “In a limited partnership certain members contribute capital but have limited liability for firm debts. The most these members can lose is their investment.” Twomey, (2013). In this case Chad seems to want equal partnership because he is suggesting to his Dad to form the partnership. However, if they do move forward and form a legal partnership they should establish the company as Dad and Chad Expert Handyman Service LLC not LLP. The reason? A company that is registered under LLC have “a favorable tax ruling on this form of organization by the Internal Revenue Service” Twomey, (2013). The difference between an LLC and a corporation, is that the LLC does not pays no federal taxes on its income as an entity. However, the “income (or losses, deductions, and credits) flows through to the LLC’s owners based on their proportionate interest in the company.” Twomey, (2013). Another benefits of having the company registered as an LLC is that the Dad and Chad have limited liability for their business 's

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