Question

Think about a possible business you might form in the near future, and post the following information: 1. Describe the business in one paragraph. 2. What business form/organization would you use? Explain your reason(s) for your choice. 3. How would you capitalize, and what ownership interest(s) would you offer investors 4. Regarding the investment in your business, how would it be documented? 5. Identify at least 3 questions, or concerns, i.e. investment, control, liability, etc., you and your investors may have and how you would address them at the time of formation, or organization.

Answer 1

1. I along with some of my friends have decided to start a new restaurant at Kochi as a partnership concern.The location for the restaurant is planned to be at the central townplace.Three of the partners will be fully engaged and active partners while other four will be dormant partners.The duration of the partnership will be partnership at will.

2. The business will be a partnership concern and the reason for the choice is

• Easy formation
• Less legal formalities and legal obligation
• Quicker decision making
• More access to resources than in sole proprietorship.
• Voluntary registration
• Compared to company,more privacy can be maintained and so on

3. The partnership interest is set through agreement between the partners need not be equal among the partners. The profit sharing ratio can be on the basis of capital contribution or as per the an agreed basis.In the absence of agreement,partners share the profits equally.

4. The partnership agreement can be oral or written. However,it is considered desirable to have it in writing. The document in which terms of partnership as agreed by the partners are set forth ,is called partnership deed.So the amount of investment or capital contributed by each partner will be documented in the partnership deed.

5.Concens related with partnership:

• Liability- The liabilities of all the partners will be unlimited. They are personally liable to the third parties for the debts of the firm.
• Duration:The partnership firm in terms of duration can be either partnership at will or particular partnership. So our business will be duration at will.
• Control: While all partners have the right to control the operations of business,it can be decided by the agreement among partners.