Week 1-3 In a Nutshell Activity 3 PDF

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Activity 3 Communicating in Practice Your friend, Oliver Lung, recently completed his second year in his own business. Oliver's business is growing rapidly and he needs an infusion of funds to help finance the expansion. Oliver tells you about his friend Mary who has access to funds and is a creative individual with whom Oliver gets along very well. Oliver is considering offering Mary a piece of the business and forming a business partnership. Oliver says, "Mary and I go way back and are close friends so I don't think we need any formal written partnership agreement." Required: Write a memo to your friend Oliver to explain the purpose of a partnership. Comment on why a written agreement is essential and what matters should be included in the agreement.

To: Oliver Lung From: Trixie S. Bantugan Date: March 27, 2021 Subject: Purpose and Components of a Written Partnership Agreement

The purpose of this memo is to present the function, importance, and key components of a formal written partnership agreement. Although there is no requirement for a written partnership agreement, it is preferable to have such document to avoid legal problems and disagreements between the partners and give the partnership solid direction by clearly setting out terms and conditions of their business relationship. It can manage expectations, provide confidence about the future of the business venture and act as a safeguard to protect both the business venture and each partner’s investment. In the absence of a written agreement, disputes may arise among the partners, which often results in costly legal proceedings. The following are the main areas covered by a partnership agreement: •

Names and contact information of each individual partner

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Purpose of the partnership and primary place of business

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Designated terms of ownership

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Amount of capital each partner invests in the business

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Partnership shares

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Directives about the distribution of profit among partners

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Company management

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Operation details

A PA is a contract between partners that sets out the terms and conditions of their business relationship. Ideally, the deed should be prepared by a specialist solicitor when the partnership is set up. The purpose is to create a document that sets out a clear process for dealing with every possible situation where there might be change, confusion or disagreement between the partners. Terms such as salaries and profit share, roles/responsibilities and voting rights, property owned by the partnership, partners coming and going, and the dissolution of the partnership should all be specified in the PA document – and in particular:

A partnership is a form of business where two or more parties agree to contribute money, asset, or industry to a common fund, distribute responsibilities for managing an organization and share income and losses that the business generates....