Tory, Becky, Hal, and Jere form TBHJ Partnership as equal owners. TBJH Partnership rents heavy tools and

Question:

Tory, Becky, Hal, and Jere form TBHJ Partnership as equal owners. TBJH Partnership rents heavy tools and equipment. Becky and Hal are married to each other while Tory and Jere are brothers but are not related to Becky or Hal. Because Becky and Hal have other jobs, Tory and Jere are to be the full-time managers of the business. Although Tory and Jere will run the business full-time, Becky will help in the store on weekends and some evenings. Hal will lend his financial expertise to the firm by doing the bookkeeping and preparing the tax returns. Even though the four have equal ownership interests, it is not clear how each owner is to be compensated so that there is equity among the partners yet rewards for those engaged in specific tasks. Hal has told the others that they cannot receive deductible salaries. However, he suggests that guaranteed payments be made to each partner/employee for an agreed-upon amount based on the value of the services each provides and/or the time spent at the store. Discuss the ramifications of employing this plan and whether this is an equitable way to allocate compensation among the partners. What are the implications of this arrangement for the partners and the partnership?

Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Concepts In Federal Taxation

ISBN: 9780324379556

19th Edition

Authors: Kevin E. Murphy, Mark Higgins, Tonya K. Flesher

Question Posted: