Erin Carson, Megyn Delaney, and Caitlin Erikson form a partnership as a first step in creating a business. Carson invests most of the capital but does not plan to be actively involved in the day-to-day operations. Delaney has had some experience and is expected to do a majority of the daily work. Erikson has been in this line of business for some time and has many connections. Therefore, she will devote a majority of her time to getting new clients. Required:Write a memo to these three partners suggesting at least two different ways in which the profits of the partnership can be allocated each year in order to be fair to all parties.
Erin Carson, Megyn Delaney, and Caitlin Erikson form a partnership as a first step in creating a business. Carson invests most of the capital but does not plan to be actively involved in the day-to-day operations. Delaney has had some experience and is expected to do a majority of the daily work. Erikson has been in this line of business for some time and has many connections. Therefore, she will devote a majority of her time to getting new clients. Required:Write a memo to these three partners suggesting at least two different ways in which the profits of the partnership can be allocated each year in order to be fair to all parties.
Chapter13: Choice Of Business Entity—general Tax And Nontax Factors/formation
Section: Chapter Questions
Problem 34P
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Erin Carson, Megyn Delaney, and Caitlin Erikson form a partnership as a first step in creating a business. Carson invests most of the capital but does not plan to be actively involved in the day-to-day operations. Delaney has had some experience and is expected to do a majority of the daily work. Erikson has been in this line of business for some time and has many connections. Therefore, she will devote a majority of her time to getting new clients.
Required:
Write a memo to these three partners suggesting at least two different ways in which the profits of the partnership can be allocated each year in order to be fair to all parties.
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