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researchpaper - 1 Liability or Profitability: Partnerships...

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Liability or Profitability: Partnerships Garrett Ozar Western Carolina University Professor Willey March 31, 208 1
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One of the biggest decisions that an entrepreneur has to make when starting a company is what kind of business form they are going to use for their venture. A few of the different forms are: sole proprietorship, partnership, limited liability company, s corporation and c corporation. Partnerships play a big role in the courts of law because of their complexity with regards to ownership and liability. According to West’s Legal Environment of Business , the definition of a partnership is “an agreement, express or implied, between two or more persons to carry on a business for a profit.” The parties in agreement with one another are “co-owners of a business and have joint control over its operation and the right to share in its profits” (Cross and Miller, 2007). When two or more parties decide to join together to form a new or existing partnership, it is vital that specified terms are put in writing and signed by all parties to avoid later discrepancies down the road. However, the Uniform Partnership Act (UPA) “governs the operation of partnerships in the absence of express agreement and has done much to reduce controversies in the law relating to partnerships” (Cross and Miller). The UPA’s definition of a business partnership is very similar to the textbooks; however, the words “for profit” were added at the end. The UPA has three distinct elements that provide a basis to define whether the business is a partnership or not. The three are, “A sharing of profits and losses, a joint ownership of the business, and an equal right in the management of the business,” (Cross). Although it states that is a partnership when the sharing of profits and losses is present; nonetheless there are special circumstances when a debtor may owe a creditor money and in order to repay it they must share some of their
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researchpaper - 1 Liability or Profitability: Partnerships...

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