Raj Khan and Anisha Rai, two professionals in the finance area, have worked for Chopra Leasing for a number of years. Chopra Leasing is a company that leases high-tech medical equipment to hospitals. Raj and Anisha have decided that, with their financial expertise, they might start their own company to perform consulting services for individuals interested in leasing equipment. One form of organization they are considering is a partnership.

If they start a partnership, each individual plans to contribute INR50,000 in cash (amounts in thousands). In addition, Raj has a used computer that originally cost INR3,700, which he intends to invest in the partnership. The computer has a present fair value of INR1,500.

Although both Raj and Anisha are financial wizards, they do not know a great deal about how a partnership operates. As a result, they have come to you for advice.

Instructions
With the class divided into groups, answer the following.

a. What are the major disadvantages of starting a partnership?

b. What type of document is needed for a partnership, and what should this document contain?

c. Both Raj and Anisha plan to work full-time in the new partnership. They believe that net income or net loss should be shared equally. However, they are wondering how to provide compensation to Raj for his investment of the computer. What would you tell them?

d. Raj is not sure how the computer equipment should be reported on his tax return. What would you tell him?

e. As indicated, Raj and Anisha have worked together for a number of years. Raj’s skills complement Anisha’s and vice versa. If one of them dies, it will be very difficult for the other to maintain the business, not to mention the difficulty of paying the deceased partner’s estate for his or her partnership interest. What would you advise them to do?