Professional Documents
Culture Documents
Partnerships
Prepared by
Kristie Dewald
University of Alberta
Electronic Presentations in Microsoft PowerPoint
Partnerships
I.
II.
III.
Partnerships
Different alternative structures for a business activity
includes:
Partnerships
Useful for individuals who practice together in a profession
and small business enterprise
Also used to form part of a business structure of large public
and private corporations.
Limited partnerships (Chapter 16)
Joint Venture (Chapter 16)
These are non-taxable entities
The entity itself is not directly liable for tax on its earned
income
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Partnerships
A partnership is a self-contained entity holding assets,
liabilities, and partners equity.
Partner 1
Partner 2
Partner 3
Partner 4
Partnership
B. Partnership Agreement
B. Partnership Agreement
1. Partners Contribution
. A partner can participate by contributing capital or effort
or a combination of the two.
. Financial resources contributed can include cash and
specific assets such as land, buildings, equipment,
patents, and franchises.
. The cash or the value of the specific assets contributed
constitutes the partnerships equity base.
B. Partnership Agreement
2. Management
Usually all partners participate in the management of the
enterprise,
By agreement specific partners may be excluded from
this process
Procedures for decision making can be tailored to the
wishes of the participating partners.
Management decision making is completely flexible and
can be as democratic or as autocratic.
B. Partnership Agreement
3. Sharing of Operating Results:
Profits or losses are usually shared:
as a function of capital contributions, or
the degree of effort or participation in the business process, or
Both of the above.
C. Partner Liability
Standard partnership is a separate functioning entity for
management purposes.
It is not a protected legal entity that is separate from
the affairs of the partners.
All obligations and debts incurred are the responsibility of each
partner
All negligent activities performed by them, are the full
responsibility of each partner.
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C. Partner Liability
Most provinces have introduced a Limited Liability
Partnership (LLP)
Each partner is not responsible or liable for the negligence
of another partner
If partnership is sued only particular partners may be held
liable for their own negligence; other partners are protected
Normally only permitted for regulated professions such as
lawyers and accountings
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60%
partner
40%
partner
$500,000
(100,000)
$300,000
(60,000)
$200,000
(40,000)
10,000
40,000
100,000
6,000
24,000
60,000
4,000
16,000
40,000
20,000
12,000
8,000
$570,000
$342,000
$228,000
Partnership
Business:
Retail
Manufacturing loss
Property:
Interest income
Eligible dividend Income
Rental income
Net Capital Gains
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16
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$50,000
$50,000
Partnership
Net worth
$100,000
$33,333
$33,333
$33,333
$50,000
$50,000
$50,000
Partnership
Net worth
$100,000
Partnership
Net worth
$150,000
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20,000
24
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Sold
At
FMV
Partnership
Asset FMV $25,000
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D. SBD and
Private Corporate Partners
Partnership earns $600,000 in ABI. Structure of
partnership is:
Corporate Partner
1
Corporate Partner
2
ABC Partnership
D. SBD and
Private Corporate Partners
Allocation
Partnership
Eligible for SBD if
partners qualify
Not eligible for
SBD
Total
CP # 1
CP #2
$500,000
$250,000
$250,000
100,000
50,000
50,000
$600,000
$ 300,000
$300,000
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