Based on the rules of agency, Cakes to the Extreme is not liable to the customer, unless general partnership C was an agent of Wilbo in a undisclosed principle-agent relationship.. The rules of agency apply to relationships between principals and agents. In an undisclosed relationship, both partnerships are liable to the third party.
Big burgers is not held liable for the sick customers if it is found that the member of staff did not have either actual, implied or apparent authority to act on behalf of big burgers. The business owner relies on the on the employee to serve the customers. Unless Big Burgers is a corporation, therefore a fictitious legal person, the employer is not bound by the actions of the employee.
A general partnership is a association between persons where the owners share the profits equally. The owners are also equally liable for the losses and costs the partnership may incur. Big Donald and Small Mickey agreed to join their efforts and share the expenses. Therefore, a general partnership has been formed.
In an unequal partnership, one of the partners invests more into the business that the other. Logically, the aforesaid partner takes a bigger share of the proceedings from the business, be they profits or losses. Since the agreement in this case was Bob take 70% and Alice 30%, Bob will get 700 dollars in losses while Alice gets 300 dollars worth of losses.
In this situation, partner A has more contributions in the partnership when compared to the other partners. Consequently, unless expressed otherwise in the partnership, there would be a change in the voting rights, control and distribution of gains and losses in the partnership. Partner A has more worth in the business than the other two partners. Although it does not go without saying that all these changes take effect, the partners would have to agree on shareholding in the partnership in order to determine whether the inequality in terms the contributions affects the balance of power in the partnership.
Ideally, the profit sharing ration in the partnership is dependent on the contribution from the partners and also taking into account the level of liability borne by each partner. At the time of the inception of the agreement, Billy and Charlie each contributed equal amounts of thirty five thousand into the business for an equal share of the business. Based on this, and holding other factors constant, the profits and losses ought to be shared equally. However, in the event that future contribution is to be made, the input ought to be equal from the two partners; otherwise, the gain and loss recognition will not be on an equal basis (Fischer, Taylor & Cheng, 2008, pp.469)s
Operating a business under a partnership does not provide limitation of liability or asset protection of any sort. The partners in this agreement are both liable for the debts the business incurs. The property the partners own is not exempted from taxation. The partners in the partnerships are also entitled to a 50% discount factored into the amount of capital gains tax payable in respect to the capital gain tax assets that they hold for more than twelve months. Although the partners are required to lodge tax returns showing the distribution made to each partner, the partnership does not pay income tax. However, each of the partners has their separate tax liability and is required to pay taxes levied on their portion of the income from the partnership based on their own personal marginal rates.
References
Fischer, P. M., Taylor, W. J., & Cheng, R. H. 2008. Fundamentals of advanced accounting.
Mason, OH: Thomson/South-Western.
