The below is a scenario in which i have to make an irac, Business Law and Ethics

The below is a scenario in which I have to make an IRAC for (not sure if you know what that is) but read the scenario and see if "Faye" is able to leave legally without ramifications. You must also list the legal rules that apply to this scenario..(for example, if scenario said Suzy hit Matt with a bat unexpectedly...the rule applied would be battery...soo which rules apply to this scenario) I will post notes below also so that you can see which rules best fit this scenario and ultimately answer the question.Thankyou:)

Roy, Helen, and Faye decide to go into business together by creating a general partnership to run a used car dealership in the town of Bugtussle. The three agreed that they would initially run the business for 5 years and then decide after that time period whether or not the business would continue. Unfortunately, the dealership has not been earning as much profit as they had anticipated. Faye suspects that the lack of profits is due primarily to Roy's odd habits. Roy began consulting with a local religious group called the Children of Fire and Light because he believed that they might be able to help protect him from demons he said roaming his neighborhood last Halloween. Faye had tried to explain to Roy that the "demons" were simply children dressed in costumes and Roy said that he of course knew that most of the people he saw were children trick or treating but that some were actual demons here on earth to do the bidding of some evil leader who might mean him harm. Roy now has a daily spiritual "reading" from the head of the Children of Fire and Light. When he receives a reading which says that he should be cautious or careful of strangers he refuses to go to the office, auctions, or anywhere else. He receives such readings at least twice per week. Unfortunately, this means that the inventory of the dealership has remained habitually low and generally of poor quality not offering many choices to potential customers. Faye is also concerned regarding Helen's activity of stealing cash from the safe when she thinks that none of the other partners are watching. Faye has had enough. She would like to leave the partnership after only 18 months but is afraid of the consequences if she just packs up and leaves. Can Faye leave the partnership without being successfully sued by Helen or Roy?

*Notes i took in class for possible rules that apply to this scenario
General Partnership
-for a general partnership all of the partners are general partners; in a limited partnership, at least one of the partners is what we call a limited partner. In a limited partnership, you must have at least one general partner and one limited partner. With a general partner, all the partners have unlimited liability.

A general partner must be:

1) an association of two or more persons

2) for the carrying on of a business (can't be for charity)

3) as co-owners

4) for a profit.

-UPA, created in 1914, to provide...
-Formation of General Partnership:

1) coming up with a name for the business

2) partnership capitol; only includes money and property (does not include expertise)

3) partnership agreement; can be oral, written, or implied from the conduct of the partners.

4) partnership by estoppel: when a third party has reasonably and detrimentally relied on the representation by a partner that a nonpartner is part of the partnership. The nonpartner is deemed to be an agent of the partnership. The partner making the representation is liable for any losses suffered as a result of the representation.

5) partnership duration: there are two types: partnership for a term (a partnership for a specified period of time or for a particular purpose; it will last for that specified period of time and automatically dissolve/terminate at the end of that period; when the purpose is finished, it is dissolved) and a partnership at will (where any of the partners have the right to leave whenever they want to. There may still be a provision in the partnership agreement. Partners always have the power to leave the partnership but do not always have the right to leave the partnership).

Implied partnership agreement:

1) has there been a sharing of profits or losses with the employee?

2) Is there joint ownership of the business (have you made statements to the employee that would make the employee think they are a part owner; i.e. "you're just as much an owner as I am")?

3) Are there equal rights in management?

Rights Among Partners
1) all partners have equal management rights and equal votes regardless of their contribution.
2) most decisions require a majority vote but there are certain types of decisions that require a unanimous vote (adding new partners or changing the capital structure; altering the nature of the partnership or entering into a wholly new business; amending the partnership agreement)
3) absent an agreement stating otherwise all partners share profits and losses equally
4) assignment of partnership interest: your right to profits and then any surplus upon dissolution.
5) compensation
6) accounting rights: the books must be kept accessible to all partners. Each partner has a right to receive and a duty to produce full and complete information regarding all aspects of the partnership. formal accounting 1) when its provided for in the partnership agreement 2) when a partner is wrongfully denied access to the books 3) when another partner has breached their fiduciary duty (you have a responsibility to act on what is the best interest for the partnership while conducting partnership business) to the partnership 4) whenever it is just and reasonable

Partnership Duties and Authority
-partners have a fiduciary duty.
1) duty of loyalty: you have a duty to be loyal to the partnership
2) duty of obedience: you have a duty to abide by the terms of the partnership agreement and the decisions of the partnership
3) duty of care: its required that you use reasonable care and skill in conducting the business of the partnership
4) duty to inform: duty to pass along all information that is relevant to the partnership business to co-partners

Property Rights
-partnership property: includes all property that is originally brought into the partnership and any subsequently acquired property. all partners are co-owners of this property and cannot assign or deal with the property in any way except on behalf of the partnership

Liability to Third Parties
1) joint liability: applies with contracts. Must name all of the partners in your lawsuit and they are all jointly liable.
2) joint and several (severed/individual) liability: everyone is liable but also each partner is individually liable. A new partner is liable

Termination of Partnerships
1) terminations by acts of the partners: 1) stated time or purpose of partnership has been met 2) a partner has withdrawn 3) expulsion of a partner 4) admission of a new partner 5) by mutual agreement of the partners
2) termination by operation of law: 1) death of a partner 2) bankruptcy of a partner or of the partnership 3) illegal activity of the partnership
3) termination by judicial decree: can be terminated by: 1)insanity 2) if a partner cannot perform his or her duties 3) if a partner is guilty of improper or illegal conduct 4) the partnership can only be carried on as a loss

Notice of Dissolution
-no notice of dissolution is required if the partnership is dissolved by operation of law.
-under notice of dissolution, the first category of persons who must be notified are these: 1) third parties who have dealt with the partnership must have actual notice or be told from another source 2) third parties that haven't dealt with the partnership but know of its existence must be given constructive notice 3) third parties who haven't dealt with the partnership and have no knowledge of its existence are not required to have any notice

1) winding up: process of liquidating the assets
2) distribution: taking those assets and distributing it to everyone you owe money to.
3) surplus: whatever is left over

Limited Partnerships
-a type of partnership where you have at least one general partner and one limited partner
-RULPA (revised uniform limited partnership act)
-articles of limited partnership

Limited Liability Companies (LLC)
-business organization with limited liability of a corporation, yet taxed like partnership
-limited liability like you would in a corporation
-you have the protection of a corporation
- the ability to participate in management
-can be taxed at personal income tax rate (flow through)
-owners of LLC (members) pay personal income taxes on shares they report
-no limitation on number of owners permitted in LLC
-formed under state law

Limited Liability Partnership (LLP)
-some companies use llp's b/c certain types of businesses are not allowed to use llc's (such as law firms)

Posted Date: 7/1/2014 1:34:00 AM | Location : United States

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