Analysis of Partnership Agreements and Legal Discussions

This report delves into the critical aspects of partnership agreements, emphasizing the significance of legal discussions and the potential pitfalls of lacking formal arrangements. The report focuses on the 'Time to Grow' consultancy, highlighting the necessity of a legally sound partnership structure to prevent future disputes among partners. It underscores the importance of a written partnership agreement, covering profit and loss sharing, salary distributions, and working hours. A case study, Wang v Rong [2015], is analyzed to illustrate real-world partnership disputes, providing insights into how legal clarity can resolve conflicts regarding profit distribution, salaries, and working hours. The report suggests practical steps for 'Time to Grow' to establish a robust partnership, including defining profit-sharing ratios and ensuring a legally binding agreement to avoid future disagreements. Furthermore, the report also covers the importance of legal discussion for the firms. By analyzing the case studies, the report provides suggestions to help the company to avoid legal issues.

PARTNERSHIP

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1.Importance of having legal discussion in partnership firm ...............................................1
2.Case law related to formation of partnership disputes Wang v Rong [2015]....................2
3.Suggestions to the partners of Time to grow company for establishing their partnership. 3
CONCLUSION ...............................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Partnership is the form of the business in which the ownership is in the hand of more than
two individual who come together for sack of shared profit. There are different partnership
arrangements, in some kind of partnership all partners used to share the profit and liability
equally and the in other used to share the limited. The report lay emphasis on the Time to Work
consultancy where tree partners established a firm but there is no legal arrangement between
them so discussed the importance of legal arrangement and also highlights a case study of coffee
shop in south wales which discuss the disputes between the partners and also provide the
suggestion to run the business smoothly (Marquis & et.al, 2019)
1. Importance of having legal discussion in partnership firm
A Partnership Agreement is a dead among two or more person so that they operate as
well as manage a business in order to obtain the profit. It is basically a common business
structure in Australia, it can be constituted in other business also for example a company or a
trust, a sole trader (Cohen, 2017).
Yes, legal discussion is necessary for the firm because it can measure the profit and loss
sharing as per the investment ,defines the ownership interest ,capital contributions etc. given
below are some importance of legalization of firm (McCarthy, 2016).
According to section 6(3) of partnership act of 1963 that must be joint ownership for
sharing of profits is a prime factor through which partnership exist, also section 28 explains that
all the partners must bring equal losses of the firm. The most common partner’s right is to the
management of the company and able to right to access the company’s confidential financial
reports which came under the section 28(9).
Without a written agreement- it is not specified how an owner can sell own interest to
anyone else which includes a competitor (Robertson, 2016). As company could not address what
happen upon the death as well as disability of an owners and how will other as owners react on
this one, as they end up their business with their spouse or family members or the disabled
person with self. It will also allow partners to accept the most important decision in advance.
Such as how to handle disputes (Miro. & Del Pozo, 2016).
Limited partnership-According to the section 60(1)which indicates that limited partner
can be limited to show in the register such as limited partner could not take the part in any of the
management of the business of the limited partnership(Browne, 2018).
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Partner's liability- it is the most important question for any partner that what the
liability is under the arrangement. Each and every partner of the firm held out in order to bind
the firm as well as partners both in the terms of agent and principle. as each partner is
accountable for both legally as well as financially for the others partners in business .it happens
when the one partners acts as the negligently and there is no assurance, as the major cause of the
distress for the partners arises when the other partners of the firm become insolvent as because of
that the weight of the total liability would rest on solvent partners. For example if the person
share in the business is 25% partner's share then responsible for the covering the all over damage
which arises during the negligence if the others painters could not have means to pay (Petri &
Plummer, 2016).
2. Case law related to formation of partnership disputes Wang v Rong [2015]
As written agreement prepared by the account without any legal training. Here account
used any internet precedent for the preparation of the agreement which was not appropriate for
the partnership agreement. first issues arises that whether Wang and Zang both are entitled to
50% of the profit of the partnership of the coffee shop and whether Rong was alone entitled the
remaining 50% of the profits. the court find this issues to be answered in the affirmative as
mention in the clear wordings in the partnership agreement as each and every partners constitutes
to 50% of net profit (Marquis & et.al, 2019).
This issues can happens in the "Time to Grow" company as there is a rise of the conflict
among the partners for the distribution of the profit sharing of the partnership as there is no clear
mention or written agreement of the legal discussion of the profit sharing.
Second and third issues arises in the coffee shop company was whether Wang was
entitled to $ 30,000 per annum plus $ 20,000 per annum for the expenses of business's
contributions with the Wang and whether Rong were also entitled to the salary of $ 50,000 per
annum (Cohen, 2017). However courts highlights that the under the general act of partnership,
partners are not allowed to entitled to salaries. The court should answer it affirmatively as court
noticed that the total profit of the firm was less than $ 100,000 as each partner should contribute
the equal capital to the shortfall. This issues can faced by the "Time to Grow"company as owners
faced conflicts to the distribution of the salaries (McCarthy, 2016).
fourth issues was whether Wang should get the wages of $30,K and $20K for business
expenses if Wang didn't work for 2 to 3 days within the week at the business .as court noticed
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that in partnership Agreement there is no need of each partner to work in a specified numbers of
hours. Thus, the fiduciary duty which is imposed on the partnership could oblige each partner to
devote equally (Browne, 2018). This issue should be discussed in the firm “Time to Grow" as
business partners of the firm should not arises any issues regarding to the specified hours of
working as court discussed there is no need of questioning of the no of hours that the each
partner works as mentioned above in fiduciary that all partners imposed equally (Browne, 2018).
Thus court also noticed that terms such as wages and salary in the agreement indicates
that Rong gets the wages of $ 50,000 while Wang received an amount of $30000 plus a $ 20000
for the business expenses here Wang only required to work for 3/5 of the time Rong worked to
get salary (Partnership dispute: Wang v Rong [2015] NSWSC 1419, 2015). There is no need to
do work 2 to 3 days per week unless this amounted to 3/5 of the time required to work through
Rong as there is no acknowledgment of any required working hours (Petri & Plummer, 2016).
Last issue discussed whether the three partners were combined and jointly as well as
severally liable for the uncertainty in the organization. Court ruled that three partners are jointly
responsible for the liable because of their partnership. This issue also discussed in the firm
"Time to Grow" as if any of the partner deny about the Debts then his will create the problems
for partnership such as company faces the crisis related to the financial issues (McCarthy, 2016).
Like for another example of partnership cases which is Diumelli v Giumelli [2003] WASC 259
which lays down the way in which assets are to be distributed on final settlement of accounts
consequent upon dissolution of partnership that is covered under section 57 of Partnership Act
(Diumelli v Giumelli [2003] WASC 259, 2019). This will be helping all partners during the time
of dissolution of partnership in any form. So this will also help Kai, Sen, Luc and Mitsi as well
which means that they will discuss over exact business arrangement. As all of them have
contributed $20000 to cover the initial set-up cost so it is required that they are forming one
partnership agreement for this.
3. Suggestions to the partners of Time to grow company for establishing their partnership
'Time to grow' consultancy firm is suggested to follow many key points that firm did not
followed while coming into partnership. The three partners started the business without any
agreement. As to start a business with partners it is required to make partnership agreement so
that partners cannot face conflicts in future. When partnership agreements is made it include the
content that are related to the partnership profit sharing ratio as well as loss sharing ratio which
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should be decided before agreement is made, salary payable if decided by the partners also as the
case study discussed above of the coffees shop clearly mentions that there is rise of conflicts
about the working hours which was discussed above so Time to grow firm also suggested that
proper written agreement required for eliminating conflicts etc (Petri & Plummer, 2016).
In the case study the partners does not have deed which arise conflict for partners in their
profit sharing ratio which the partners are entitled to be shared equally. When deed is not being
followed the law does not allow any salary to the partners. The partner of consultancy firms
faced issues regarding the profit sharing ratio that one partner demanded 50% and other two
were given half of 50% and salary distribution was illegal as deed was not present between the
partners.
The company is highly suggested to come in partnership deed as the deed will define the
profit sharing ratio in between the partners and for the working partner it can entitle to get salary.
By coming in deed the partners will not face conflict in future and enhance the smooth
functioning of business in future aspects (Delmon, 2017). With the help of partnership deed all
the four of them will come under legal partnership that is defining their shares into profits and
loss as well and helpful during time of dissolution.
CONCLUSION
It is summarized from above report that there is a need of the legal form of the
partnership as without it creates the disputes among the partners. The report highlighted about
the importance of legal discussion such as without a written agreement Time to grow company
cannot cadres if death and stability occurrence to the partners it also concluded about the various
issue regarding to the salary distribution and specified working hours of the Partners with the
help of the case study happened in the South Wales, further report summarized about the
suggestion to the company such as defining of the proper sharing of the profit and loss sharing.
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REFERENCES
Books and Journals
Browne, S. (2018). Beyond aid: from patronage to partnership. Routledge.
Cohen, E. (2017). CSR for HR: A necessary partnership for advancing responsible business
practices. Routledge.
Delmon, J. (2017). Public-private partnership projects in infrastructure: an essential guide for
policy makers. Cambridge University Press.
Marquis, E.& et.al.(2019). Growing partnership communities: What experiences of an
international institute suggest about developing student-staff partnership in higher
education. Innovations in Education and Teaching International.56(2)184-194.
McCarthy, J. (2016). Partnership, collaborative planning and urban regeneration. Routledge.
Miro, J. & del Pozo, C. (2016). Fluorine and gold: a fruitful partnership. Chemical
reviews.116(19), 11924-11966.
Petri, P. A., & Plummer, M. G. (2016). The economic effects of the Trans-Pacific Partnership:
New estimates. Peterson Institute for International Economics Working Paper. (16-2).
Robertson, J.(2016). Coaching leadership: Building educational leadership capacity through
partnership.
Online:
Diumelli v Giumelli [2003] WASC 259. 2019. [Online]. Accessed through: <
http://www.ahernslawyers.com.au/latest-news/dissolution-of-partnerships/>.
Partnership dispute: Wang v Rong [2015] NSWSC 1419. 2015. [Online]. Accessed through: <
https://www.pcclawyers.com.au/news-centre/recent-cases/265-wang-v-rong-2015-nswsc-
1419>.
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