Tom, Reena and Terry have been running "Magic Wonders, a children's birthday party business specialising in magic shows for birthday parties for children. They don't have an office but have a website and work out of Terry's lounge. Terry is the creative force behind "Magic Wonders," he came up with the idea for the business and is the magician for all the magic shows, with Reena acting as his assistant. Reena attends to all the appointments and marketing of the business, while Tom is the general manager and in charge of stock control; Reena and Tom are both paid a salary from "Magic Wonders" but are also mentioned on the letterhead as partners. Terry is not paid a salary, but instead he retains the remaining profits once all debts and salaries are paid. One month after his appointment Terry is performing his magic show at a customer's birthday party. As he is blowing air into a balloon with a little toy panda in it, the balloon burst and the toy flies out, hits and injures the eye of a child standing nearby. It turns out that the child has been permanently blinded by the incident, and his parents are now suing "Magic Wonders." Advise whether: a) there is a valid partnership between Tom, Reena and Terry.
Tom, Reena and Terry have been running "Magic Wonders, a children's birthday party business specialising in magic shows for birthday parties for children. They don't have an office but have a website and work out of Terry's lounge. Terry is the creative force behind "Magic Wonders," he came up with the idea for the business and is the magician for all the magic shows, with Reena acting as his assistant. Reena attends to all the appointments and marketing of the business, while Tom is the general manager and in charge of stock control; Reena and Tom are both paid a salary from "Magic Wonders" but are also mentioned on the letterhead as partners. Terry is not paid a salary, but instead he retains the remaining profits once all debts and salaries are paid. One month after his appointment Terry is performing his magic show at a customer's birthday party. As he is blowing air into a balloon with a little toy panda in it, the balloon burst and the toy flies out, hits and injures the eye of a child standing nearby. It turns out that the child has been permanently blinded by the incident, and his parents are now suing "Magic Wonders." Advise whether: a) there is a valid partnership between Tom, Reena and Terry.
Chapter14: Choice Of Business Entity—operations And Distributions
Section: Chapter Questions
Problem 76TPC
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