1. The owner of an accounting practice is considering establishing a partnership with two other persons to carry on the business. What are the major disadvantages of the partnership form of organization that she should consider in making her decision?
2. Your employer is planning to form a partnership with one of his close friends. He explains to you that because he is well acquainted with the prospective partner, there is no need to have a written partnership agreement. He asks your advice. Give him your recommendation and the reasons for it.
3. Your employer is considering investing $50,000 in a partnership. In discussing the advantages and disadvantages of the arrangement, the employer informs you that a friend has told him that his potential loss is limited to the amount invested, $50,000. Is his information regarding this arrangement correct?
4. Two individuals who are forming a partnership ask you how they should divide the income and losses of the business. What factors should you consider in making a recommendation?
5. You work for a partnership. The partnership agreement between the two partners specifies that one partner is allowed a monthly draw of $3,000 and the other a monthly draw of $2,000. The agreement does not mention salary allowances for the partners. At the end of the year, one partner maintains that a drawing is the same as a salary allowance. They ask your opinion. What do you tell them?
6. One of the partners in a partnership that employs you is retiring from the business. Her capital account has a balance of $256,000. She tells you that she expects to receive a check for $256,000 from the partnership. Explain to her the proper procedure for determining the amount she will be paid.