Exam 26: Sole Proprietorships and Partnerships

Mike, James and Mary, advertizing consultants, enter into a partnership called "Sensational Adverts". About a year after the partnership is established, Mike and Mary have an argument and Mike tells the other partners that he will soon be leaving the partnership. A week later, "Sensational Adverts" is invited to submit a bid to produce an advert for a local beer company. Mike, who is the member of the partnership in charge of beer adverts, sees this as an opportunity to start his own business. Mike resigns from "Sensational Adverts" , starts his own company, and then submits a bid. Mike's bid is accepted. Mike's conduct is a breach of his fiduciary duties.

What are the advantages of carrying on a business venture as a partnership rather than as a sole proprietorship?

In the absence of an agreement stating how the partnership is to be dissolved, name three circumstances where a partnership would be terminated.

Which of the following is TRUE about sole proprietorships?

Why should you register the partnership with the province?

Discuss two reasons why the partnership acts have remained virtually unchanged in the last 100 years.

If there is no explicit partnership agreement, each partner will share in the profits of the partnership according to that partner's proportionate capital contribution.

Compared to a sole proprietorship, what are some disadvantages in carrying on business as a partnership?

Partners have fiduciary duties one to another and if they are professionals they have fiduciary duties with their clients. How would these duties differ?

Lou, Pete, and Carl are all partners in a feed store business. Carl would like to retire but wants his son, Carl Jr., to take his place as partner. Is there any way Carl can have his son become a partner ?

An unincorporated business that is usually owned by one person is called a Partnership.

Of the following, which is an implied relationship between partners?

James and John go into business together as partners. They each decide to make contributions to the business of the partnership. James has two vans worth $15,000 which he gives to the partnership. John owns an old farmhouse worth $60,000 that they decide can be used as a warehouse and John gives it to the partnership. Five years later there is a falling out and they decide to end the partnership. By this time the warehouse is worth $80,000 and the vans are worth $12,000. John will be entitled to $80,000 and James will be entitled to the depreciated value of the vans, namely $12,000.

Three ladies form a partnership. They contribute the same amount of capital and they have agreed to share equally on the profits. If a loss occurs, need they share equally on the loss? If they each put in roughly the same amount of time, can their salaries be different? Explain your answer in both cases.