Dispositions of Partnership Interests and Partnership Distributions

Due to its nature, partnership is generally liable for the acts of the individual partners if committed in the course of the partnership business. However, liabilities of every partner may be regulated by the written agreement signed by partners. If no written agreement is signed by partners, liabilities of the partnership are regulated by the Partnership Act. If one of the partners retires, he or she may not be liable for the future debts of partnership if an official notice of the change is sent to creditors and the public. However, there were no official notice sent by the partners in the case; therefore, Toby may be liable for the debts of partnership. Due to the death of the third partner, partnership may be dissolved. In order to pay off the debts, assets should be sold and partners are free to continue the same kind of business after the dissolution of the

Whether certain allocations of partnership income, gain, loss, deductions, and credits have substantial economic effect and whether that has any impact on the partners’ distributive shares.

Suppose that Katherine, Brianna, and Paige have formed a limited partnership to operate a video arcade. Katherine is the general partner. She has contributed $2,000 and her time to get the operation running. Brianna and Paige, the limited partners, have each contributed $3,000. After one year of operation, the arcade has debts of $10,000, and the three partners decide to discontinue their business and the limited partnership. Brianna and Paige want their investment returned to them. Who should Katherine, who is winding up the business, pay first, Brianna and Paige, or the creditors? How much will Brianna and Paige receive? How about Katherine?

6.4 Purchase of Defaulting Partner’s Interest. If a Partner defaults as defined in Paragraph 7 below, the non-defaulting Partner may purchase the defaulting Partner’s interest in the Partnership.

g. Two or more not-for-profit entities (NFPs) that are effectively controlled by the same board members transfer their net assets to a new

* The partners can obtain a true value of the shares they possess in the company

• entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method

Although it is non-cash expense, the acknowledgment of depreciation illustrates the loss (decline) in fixed assets value (About, 2010). It is charged against gross profit, which gives an edge in the precision to the net income reported. According to Ben (2007) Income statement profit is relied on for the computation of tax, dividends and investment policies making it more convincing that it does reflects the truth in the entity’s performance. The Keating (1999) journal further expands on the essential of depreciation recognition against profit, stating that it gives a more effective ‘internal decision making and control’ within the entity. While Scot (2004) argues that ‘The depreciation/amortization method, the useful life and the salvage value are all subjective decisions.’ Although this is true; however, depreciation accounts for an insight into what cannot be physically seen but is known to affect profit. Overall, Dickinson concluded that – ‘in other words, every appreciation of assets is a profit & every depreciation is a loss’ (Mac Neal, 1970). Dickinson gives the impression that the physical and non-physical changes in assets, has to be recognised to affect profit in the income statement.

If founder B leaves after two years, he or she will retain 22.5%. Founder B can walk away with the share, or founder A can purchase the 22.5% back for a reasonable price. The rest of the shares will be forfeited. If the founder leaves after four years, he or she will retain the full 45%.

(d) Cash receipts from disposal of shares, warrants or debt instruments of other enterprises and interests in joint

There are two forms of partnerships, general partnerships and limited partnerships. There are three essential elements to a general partnership:

7. Any dispute or misunderstanding among partners will result in a loss to the business.

As mentioned above, when an asset is sold it may be sold in excess of the owner’s basis. When this occurs the taxpayer may be taxed on the gain at the more favorable capital gains rate (typically around 15%). What was not discussed in prior modules, was the treatment of capital gains for corporations, treatment of capital losses for both individuals and corporations, and how the length of ownership impact the classification and tax treatment of assets upon their sale.

(b) Whether the act of the partner falls within the usual nature and (c) manner of the business of the firm

However, if you don’t get your firm registered, you will be deprived of certain benefits, therefore it is desirable. The effects of non-registration are: