Scenario #2: Chris and Jessica's Partnership
A. There are three main ideas that need to be included in partnership agreement to allow for a business to run smoothly. These include: the contributions to be made by both partners (financial, material, and managerial), how business expenses are handled, and an outline of what happens if the partnership is terminated.
The contributions made by the partners are based on the authority of each partner. In many cases one person is the ostensible partner (active), and one is a general or limited. This means that active partner might be able to make decisions on their own rather than having to confront or discuss it with their partner. The contributions also include whose money is going to what, as well as who is in charge of employee management.
Business expenses and how they are handled should also be included in a partnership agreement. Which partner does the books, records, and method of accounting would be included in the business expenses. The partners also need to decide how to separate debts, and decide how the profits/losses should be divided.
Finally the partnership agreement should include what happens if a partnership is ended. The termination of a partnership may be due to falling out between the two partners or the death of a partner. This outline may also include what happens to the rights of the continuing partner, if he/she still wants to be involved in the business.
B. If Chris and Jessica had formed a written partnership agreement, they might have been able to avoid/prevent the management problems that occurred. With the establishment of a contr ...