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.

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.

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

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

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.

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

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

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.

Being partners is not always easy, and it takes time and a lot of effort to build up a strong relationship between two companies. There are many uncertainties around partnerships, the partner can have a hidden agenda and have an opportunistic behavior (Aswathappa, 2010). The goal or objective for the partnership can be unclear and makes it difficult to know when they have succeeded. If there is an unbalance in the level of investment, effort or expertise the other partner can feel they are not getting what they expected.

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.

* The partnership may have a limited life; it may end upon the withdrawal or death of a partner.

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.

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

It must be stipulated that personal issues and personality clashes can be serious in the demise of a partnership. Do take this into account.