Partnerships Essay

402 Words2 Pages
To: Whom It May Concern: From: Ashleigh Williams Date: 20 January 2012 Subj: Profit Allocation As you prepare to enter into this new business together, we must be sure that you are prepared and completely clear on how your profits will be allocated. These options will help you clearly see how each of you will benefit from the business according to your contributions at the start of this business. I believe the best fit for your group would be to create a limited partnership (LP). In LP, one or more general partners should be selected ahead of time to assume responsibility for all obligations incurred by the business. Since Ms. Benda Wilson will not be working with the day-to-day, Ms. Elizabeth Higgins and Ms. Helen Poncelet could potentially be the responsible parties. Now, as mentioned before your group needs to determine what process you would like to use to allocate or split the profits generated by your business. First you must calculate the percentage of what each of you have contributed to the capital of the company. I see Ms. Wilson will be contributing most of the capital. Ms. Higgins will contribute her capital through the goodwill method, which will be based on the assumption that her intangible contribution can be translated into a monetary figure. Then finally, Ms. Poncelet, with all of her experience in the business, along with her connections will also need to be translated into a dollar amount using the goodwill method. Finally, you have two courses of action: In the first course of action, you could use this allocation technique where each partner will receive their percentage of the interest which each of them put into the business. The second course of action would be a process of which would follow the fluctuation of each partner’s capital balance. As this balance moves up and down, so will the percentage of

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