Running Head: Partnership

Assignment On
Partnership
Submitted By
ABC
Date:

Partnership

Case overview:
Two friends of mine offered to develop a business of engineering consultancy firm as
partnership. They have already acquired a business contract, which will yield $50,000 plus daily
allowances for expenses. This $50,000 will be cumulated gain of all three of us, so we need to
divide these returns in three of us. If the daily allowances are ignored then this opportunity yields
us $16667 per month and $200,000 per year. I am working on a job in Engulf and Devour, with a
compensation of $150,000 per year, which spread as $12500 per month. Besides this, the growth
opportunities in the firm Engulf and Devour are limited. Therefore, it is better to think about the
opportunity brought by friends and to evaluate its outcomes with possible drawbacks (Sher &
Bromberg, 1958).
1. Issues that you must address before forming this relationship
Before entering into the consultancy business in partnership, there are some aspects of the
business to be clarified. These are including;
A. Understanding Partnership Basics
i.

Partnership
partnership is type of business which is having more than one owner, with this
there is also one condition applicable to partnership that they have not proceed
any formal documentation before the state to become a corporation or limited
liability company.

ii.

Different types of partnership

Different types of partnerships with their pros and cons are given as under.

Personal liability for owners:

Partnership

Partnership is simple and less costly business arrangements but there are
also some arrangements that you must consider before you enter into
partnership business. These are includes Personal liability of the owner. In
partnership all, the owners of the business are liable for the business. This
may include debt, judicial proceeding and obligations. It is supposed that
if the business is unable to pay for the liabilities of business then the
debtors or creditors can take legal penalties against any of the partners and
in case his belongings and possessions might be captured and auctioned.
There are some cases in personal liability arrangements, which limit the
liability of a partner. This may include;

Limited partnership:
In such form of partnership, it is notified that one of the partners having
only limited liability means limited partners have only passive investment
in the firm. The major loss in this type of partnership is just the investment
in the business.

General partnership
The general partner of a partnership is liable for the companys liabilities
and the creditors will probably pursue for him for their payments. In this
case, the risk of the person is high. This partner has investment in the firm
plus the liability authority so it is mostly observed that this partner has
major share in the companys earnings and sales.

Joint authority

Partnership

In this, any partner can make decision about the operation of the business,
and if the decision is proved wrong then the both parties has to bear the
loss. For example if the company has sign a contract to deliver a product
at low prices than market then it will be produced and the contract
fulfillment must be proceeded even business suffer a loss. This is because
the decision has to be made by an authority.

Joint liability
In this ever business partner can be pursued for the payment of the
business. The full amounts of the business can be collected from any one
of both, the mostly cases one who have the capability to pay, can be sued
by creditors.

iii.

Creation process of partnership

There is no any clear cut direction to develop a partnership, but it is
advisable to develop a written agreement between parties so that the
futures concerns could be protected.

iv.

Taxpaying criteria by partners

The profits and loss for income tax are reported on individual basis. for
example if you have earned a profit then you will pay the tax on your
personal filings in tax department.

v.

Partnership termination:
Partnership ends when one partner gives notice to leave the share of the
firm. Sometimes the partnership agreement in written describes the
process to end a partnership entailing the systematic criteria.

Partnership

Above all points trigger a much more important concern that is;
B. Consideration about the partners with whom you are going to start your
business
The partners with whom you are going to start your business, must be clearly understood.
This understanding may include;

Background of partner

Your previous history of dealing with them

their relation with you

C. Advantages of partnerships

More options to grow in your career

Easy to manage when there are two more friends

The collective thoughts can make business grow faster

D. Disadvantages of partnership

If partners are not faithful with the business then the investment will be ruined

The liability for the business payables

Actions taken from other partners against you

Distributive control over business, for example, you cannot implement your will
except asking other partners

E. Cost vs. opportunity analysis

If I leave the job, which is paying me now $12500 per month and a designation,
which is fair enough, then might it be better to start a partnership business.
The new opportunity payout $50000 to the new consultancy firm, and it will return
$16667 to each of three partners and the daily expenses allowances (Rosin, 1989).

Partnership

2. Future of partnerships
Once all the information about the issue related to partnership are collected then the second
stage consists of taking the decision about the future of our participation. This includes the
following consideration (Edwards, 1992).
A. Rules of partnerships
Partnership could be managed by formal or psychological contract between partners.
Different rules for partnership are considered, and it is necessary to take some legal
partnership practices to secure your future. The written agreement is helpful to make
decision like rules to draw salary form business account, losses sharing and liability
dependency or independency. The decision about either partnership will be evaluated
by internal auditors or from external firms. The important concepts in partnership
laws are including

Partnership agreement: it includes how partnership will be managed,

ownership interest shared, decision control, partner business leaving policy
etc.

These rules will consists of UPA (Uniform Partnership Act) (16100-16962),

comprise of each partner share in profit loss, control in business operations,
and ways of terminations of partnership.

Under state agency law, business will be registered, which will administer
business evolution, organizing and dissolution.

B. Form of agreement

Partnership

Agreement should be either written document or a psychological contract between

my friends and me. The most favorable type is written document legalize by formal
authority of federation under partnership act.
C. My liability assessment
This includes the variety of partnership, and entails the type of partnership agreement
I have to sign; this depends upon the selected form of partnership. If I want minimum
liability in business then limited liability partnership would be a better option. This
section will be managed by ULPA (Uniform Limited Partnership Act) if I want
limited liability in business (Das & Teng, 1998 ).
D. Dispute resolution
If in the partnership business any dispute arise then which way should be used to
resolve the issue. Everything including roles, responsibilities and liability of
individual is written then the dispute can be eradicated instantly.
3. Developing plan
When future concern with issue related with partnership are addressed and the decision for
the partner is made then we will move forward to developing business plan. The will
encompasses the operational feasibility of the business in order to make flow of operation
smooth. Planning a business plan a critical step in initial stage. It will include steps as under.
A. Know your abilities
The experience I had gain through the existing job at E&D would be good for my
business decision making, as I will be able to take critical business decisions quickly
and effectively. The further addition of my friends experience will add value to the
firm. Their ability to attract project will be beneficial, as they had pulled a project

Partnership

even they did not have a company. I have been working at a well designation in
E&D; it will help in consultancy business as a edge.
B. Goals
The goals of the business will be provide our customers a good and perfect
consultancy services based on our engineering expertise. Provided with experiences it
will also flourish my ability to grow in my field and provide growing ground. The
aim is to become a well reputed in my field (Cornell University Law School;, 2014).
C. Plan design
Design of the business will be developed in these steps. In this step, we will chart out

whole business goals

Goals of the business will be documented in a proper to which we will strive to

achieve.

Opportunities

Opportunities of the business will be in terms of our experiences and their benefits to
consultancy business.

Responsibilities
Responsibilities of the partners, including the control rights and decisionmaking criteria, will be discussed in this section. The decisions about the
critical projects in consultancy will be taken by whom and what variables will
justify that result.

document the processes

Partnership

This document will entail a roadmap for our set goals. In the time of difficulty, it will
guide us to take necessary actions. It will also include how business operations will
be carried and how it will be evaluated.

Bibliography
Cornell University Law School;. (2014, October). Partnership. Retrieved October 17, 2014,
from Partnership law: an overview: http://www.law.cornell.edu/wex/partnership
Das, T. K., & Teng, B.-S. (1998 ). Between Trust and Control: Developing Confidence in
Partner Cooperation in Alliances. ACAD MANAGE REV , 491-512.
Edwards, H. T. (1992). The Growing Disjunction between Legal Education and the Legal
Profession. Michigan Law Review , 34-78.
Rosin, G. S. (1989). Entity-Aggregate Dispute: Conceptualism and Functionalism in Partnership
Law. HeinOnline .
Sher, B. D., & Bromberg, A. R. (1958). Texas Partnership Law in the 20th Century - Why Texas
Should Adopt the Uniform Partnership Act. HeinOnline , 263 .