1. Prior to the formation of the Dorm Apparel L.P., what form of entity did Kenn
ID: 2513946 • Letter: 1
Question
1. Prior to the formation of the Dorm Apparel L.P., what form of entity did Kennedy and Fitzgerald use to operate the business? 2. Assume Big Bank attempts to collect the partnership loan from Johnson. Does Johnson’s limited partnership status protect him from Big Bank’s attempt to collect the loan? Why or why not? 3. What is the legal effect of Johnson’s decision to become involved in the day-to-day operations of Dorm Apparel L.P.?**all information from McGraw Hill** Required information Partnerships Read the overview below and complete the activities that follow Although partnerships are not as common as they once were, they are still an integral part of the business entity landscape. Because partnership liability may arise even when the parties have not expressly agreed to form a general partnership, it is important for business owners and managers to understand implications of conducting business with another party.Limited partnerships where one or more partners are primarily investors and not involved in daily operations, operate under a separate set of rules than general partnerships. CONCEPT REVIEW Review the section on "Partnerships in your textbook. Apply the legal doctrines to the following hypothetical case study and analyze how the law impacts the practical dilemma and decisions faced by the partners Read the case below and answer the questions that follow. Fitzgerald and Kennedy were roommates in college and began to sell custom-designed T-shirts with dormitory logos. On each shirt they put a small logo of their own, which read "Dorm Shirts." They both contributed to the design, production, and marketing of the T-shirts and split any profits. Eventually, the shirts became so popular that the roommates began plans to expand their operations and offer other apparel (such as sweatshirts) with dormitory logos. They ultimately locate Johnson, who agrees to finance the expansion with a $50,000 contribution and to cosign a partnership loan with Big Bank for an additional $50.000. Johnson forms Dorm Apparel L.P. and has his counsel draft a limited partnership agreement that names Fitzgerald and Kennedy as general partners and Johnson as a limited partner. The business expands rapidly and initially sales are so good that Johnson often pitches in by helping with design, production, and marketing. Eventually however, the partnership's expenses and debt outpace its revenue, and Dorm Apparel defaults on the loan to Big Bank
Explanation / Answer
1. Prior to the formation of the Dorm Apparel L.P.they called as "Dorm Shirts" that was small entity form. There were no specific form both have started Shirt business with their logo.
2.Dorm Apparel L.P is a limited partenership in which Fitzgerald & Kennedy are general partner & Jhonson is limited partner.
General partner refers to a relationship in which all partners contribute to the day-to-day management of the business. The general partner may also be personally liable for the debts of the company.The general partner may also be personally liable for the debts of the company
A limited partnership is a relationship where the limited partner may not be involved in the day-to-day management of the business. This partner may have just contributed funds to the business, and often the funds that they contribute are the extent of their liability.the limited partner is not. A general partner’s liability is not limited to their investment
Yes, Johnson is partially protect from his status of Limited liability partnership. As per above definition of Limited partner & general parner definination shows that Jonhson is a limited partner status not fully protect to pay debt protect from big bank attemt to collect loan . His liability to pay to the extent of contribution of fund beyond that he is not liable for debt.
3. Johnson is a Limited Partners hence he should not involve in in day-to-day operations of Dorm Apparel L.P. His decision is not correct as per legal point of view. Limited partner should not have legal right to take decision on day to- day activities.
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