Question

Steve has been asked to join a partnership. What must Steve consider when choosing to become a general or limited partner?

Answer 1

-Considerations when choosing to become a general or limited partner :

• Firstly you should have to knowledge of difference between a general partner and limited partner.
• The capital account that is maintained till the date and existing balances of the previous partners if any shall be keenly considered.
• Be sure to carefully read and understand all the legal and general terms that mentioned in the partnership deed or agreement.
• Those terms and conditions in the agreement or deed will govern you all the time with your fellow partners and your relationship with the entity.
• Have a due deligence of the any litigations exists about the firm before you get into partner to the firm.
• If litigations exists verify the severity of the litigations and the responsibility of whom will take care of those.
• Previous financial statements of the firm to understand about the financial position of the entity.
• The type of industry under which the firm will be categorized should be considered.
• Duties that are shared among the partners shall be considered.
• Voting rights of the partners shall be looked over.
• The management responsibilities of each partners.
• Profit sharing ratios and liabilities of each.
• Sleeping and active partnership duties.
• All the legal requirements of the partnership to be considered.
• Compliance requirements of the firm under different laws and acts of the country.