Sam and Pam are ready to move from idea to implementation. They have a device th

Question

Sam and Pam are ready to move from idea to implementation. They have a device that will revolutionize the cooking of popcorn. Unfortunately, it will take several years to develop a production facility. Also, they are concerned that the ultimate machine, which is planned to be sold at high-end kitchen stores, might cause individuals using the device to be exposed to high temperatures of cooking oil if instructions are not followed exactly. What form of business best suits Sam and Pam at the stage of business formation?

Business Law 1

Explanation / Answer

Answer: Partnerships form of business best suits Sam and Pam at the stage of business formation.

In a Partnership, two or more people share ownership of a single business. Like proprietorships, the law does not distinguish between the business and its owners.

Advantages of a Partnership

• Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement.
• With more than one owner, the ability to raise funds may be increased.
• The profits from the business flow directly through to the partners’ personal tax return.
• Prospective employees may be attracted to the business if given the incentive to become a partner.
• The business usually will benefit from partners who have complementary skills.

Disadvantages of a Partnership

• Partners are jointly and individually liable for the actions of the other partners.
• Profits must be shared with others.
• Since decisions are shared, disagreements can occur.
• Some employee benefits are not deductible from business income on tax returns.
• The partnership may have a limited life; it may end upon the withdrawal or death of a partner.

Type of partnership:1.General Partnership

2.Limited Partnership and Partnership with limited liability

3.Joint Venture

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