Week 1 nutshell - lesson PDF

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Activity 1

Each one of us desires to have a business of are own however, not everyone had enough savings in order to build one. Through finding a partner to create a partnership, the capital needed coming from your own pocket would be cut off as it would be divided into how many partners you have. The pro’s of a partnership however does not limit to that. Through having a partner, the stressful demand of attention towards the business could also be divided the same as the capital. Despite the efforts that we do in order to not acquire losses, it is still unavoidable. In a partnership, the same with capital, the losses will also be shared with your partners.

There are different types of partners in which each has different types of cons. If you want to acquire income aside from your share of the partnerships profit, it is better to be a capitalist partner than being an industrial one. Ann industrial partner, it is a general rule that you are not allowed to exercise your profession for your own gain nor build your own business because your contribution to the partnership is your devotion of time and industry towards the partnership. Meanwhile, if you are a capitalist partner, you could build your own business taking in mind that it shall not be of the same line with the partnerships’ business.

In terms of paying of the partnerships’ liability, it is better to be a limited partner than being a general partner. A limited partner is only obligated to pay for the partnerships’ debt up to his or her contribution, on the other hand, a general partner would be asked to pay for the rest.

If you are the type of person who seeks for dominance, you should aim to have the controlling interest among the partnership. This is because during decision making, when decisions of the partners end up in a tie, the decision of the partner with the controlling interest prevails.

Activity 2 Ethics Challenge

Paul retired on good faith, thus he is entitled to received P300,000. Activity 3 Communicating in Practice

Memo: A partnership is formed in with the main purpose of acquiring profits, In your case, you only need funds to finance the expansion of your business which could be done through searching for investors or creditors thus, there would be no need to create a partnership with Mary.

Now you may say that your relationship with Mary has gone through thick and thin, however nothing has always remained constant. Your business or shall we say contribution towards the partnership is already fully bloomed and incomparable to the said fund that Mary would contribute. In case of conflicts in the future, may it be due to the management or division of profits, or for other reasons that may occur, it is better to have a written agreement upon the formulation of the partnership.

Activity 4 This activity is designed to reinforce the student’s understanding of the partnership form of business. 1. A partnership is a form of multiple ownership. For legal and tax purposes no entity is recognized. How does the entity concept relate to partnerships? Can entities be partners?

A partnership has a fictional identity. Therefore it could enter into transactions with its identity separate to the partners individual identity.

2. Creditors of a partnership may sue the partnership jointly or severally. What are the liabilities of a partner? What are the liabilities of the partnership? What do you understand by jointly and severally?

The liabilities of the partners depend on what type of partner he/she is. A limited partner is only liable up to his/her contribution while the rest goes to the general partner. Meanwhile, the partnership is liable up to its remaining assets. By jointly or severally liable, it means that the partners are equally liable as towards the point of view of the creditor.

3. What happens if the partner has withdrawn all of the income of the partnership?

There will be no effect towards the partnerships business for only the profit was withdrawn, not its capital nor the assets.

4. Can a partner avoid paying income taxes legally by not withdrawing income from the partnership?

IRS does not consider partnerships to be separate from their owners for tax purposes; instead, they are considered “pass-through” tax entities. Thus, despite not withdrawing income, a partner could not avoid paying taxes for his share of the partnership’s profit tax would pass to her....