Sixty-year-old Jim Ebers retired from his computer consulting business in Boston and moved to Florida. There he met 27-year-old Ann Bowers, who had just graduated from Eldon Community College with an associate degree in computer science. Jim and Ann formed a partnership called E&B Computer Consultants. Jim contributed $15,000 for startup costs and devoted one-half time to the business. Ann devoted full time to the business. The monthly drawings were $1,500 for Jim and $3,000 for Ann. At the end of the first year of operations, the two partners disagreed on the division of net income. Jim reasoned that the division should be equal. Although he devoted only one-half time to the business, he contributed all of the startup funds. Ann reasoned that the income-sharing ratio should be 2:1 in her favor because she devoted full time to the business and her monthly drawings were twice those of Jim.
Can you identify any flaws in the partners’ reasoning regarding the income sharing ratio?