A partnership can be rightfully defined as a formal agreement which takes place between two or more parties in order to manage the business or a particular task in hand. There are a large number of partnership agreements available at hand like the partnership where the liability of the partners is limited or where the liability of the different partners is unlimited. The report will be discussing various facets of the partnership which will then be used in order to decide upon the nature of the agreement and related criteria.
1. The nature of the partnership is decided at the time of the partnership agreement. In case any group is formed, one would be required to decide the senior partner of the group. A senior partner can be rightfully defined as a partner, whose involvement which means the risks, rewards, authority, work load and the responsibilities are greater than that of the other partners (Capaldo, Izurieta and Sundaram 2016). The senior partner has nothing to do with the age of the partner but it is largely concerned with the level of involvement that the partner is willing to put into the designated business or the task in hand. The selection of a senior partner may be done by the different partners themselves. However, the manner in which or the criteria on which the choice of the senior partner is made is as follows:
Hence, in order to choose a senior partner among a designated group, certain criteria’s as stated above might be taken into consideration.
2. Profit sharing forms an essential part of the business and any firm which wants to achieve success in the long run will be required to ensure that they decide on the terms of profit sharing so that there lies no confusion at the later period of the business (Beatty, Samuelson and Abril 2018). There are various ways in which one can split profits in a business. The most popular ways are as follows:
The decision of the basis on which the profit might be shared has to be agreed upon by the partners to avoid any confusion. The partners may choose to share the profits based on any one of the following ways however, it has to be mentioned in the partnership agreement. Moreover, if the partners feel that they are bound to receive interests on their capital, they are required to decide this at the beginning of the partnership.
3. Very often the partners working in a business are bound to receive a salary for the services which they are providing to the organization or for the hard work which they are applying behind the venture (Bryson 2016). However, there are various ways in which the profits can be divided among the partners and these ways have been discussed as follows:
Hence, in order to pay a salary to the different employees, factors like expertise, experience and the ability to generate business are required to be considered. However, the ability to generate business is the largest factor impacting the salary decision.
4. A partnership agreement can be rightfully defined as the business agreement which must be agreed upon and signed by all the partners before they begin any operations or before the profits are made. The agreement comprises of all the explicit details of the partnership. Although it is not elementary to form a partnership agreement but for any contingency and to avoid any confusion, it is advisable that a partnership agreement is formed (Allen and Kraakman 2016). The factors which will be included in a partnership agreement can be given as follows:
Conclusion
Therefore from the given analysis, it can be stated that as partnership can be described as an agreement which is made between the different partners, it is crucial to include an agreement and decide upon all the factors in advance in order to ensure that there exists no confusion with respect to it in the future.
References
Allen, W.T. and Kraakman, R., 2016. Commentaries and cases on the law of business organization. Wolters Kluwer law & business.
Beatty, J.F., Samuelson, S.S. and Abril, P.S., 2018. Business law and the legal environment
Bryson, C., 2016. Engagement through partnership: Students as partners in learning and teaching in higher education. Taylor & Francis
Capaldo, J., Izurieta, A. and Sundaram, J.K., 2016. Trading down: unemployment, inequality and other risks of the Trans-Pacific Partnership agreement (No. 16-01). GDAE, Tufts University.
Cohen, E., 2017. CSR for HR: A necessary partnership for advancing responsible business practices. Routledge.
Mann, R.A. and Roberts, B.S., 2015. Business law and the regulation of business. Nelson Education.
Miller, R.L., 2015. Business Law Today, Standard: Text & Summarized Cases. Nelson Education.
Murray, J., 2015. What is A Business Partnership? US Business Law: Tax Categories.
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