Question

1. Assume all the following facts can be proven. Dave and his sister Christa made unusual kites. They both created the designs; Dave made the patterns. Friends had always wanted to buy their kites. After Christa completed a college marketing program, she began to talk to Dave about going into business selling kites. Ed, a friend of Christa’s wanted to be involved. He said he could buy the supplies and do other odd chores. They decided to try to make a go of it and to share the profits as follows: Dave 35%, Christa 35%, and Ed 30%. Things went well for 7 months. They even hired George to deliver kites to the increased number of stores buying them. Christa and Ed became romantically involved. This was followed by a heated dispute. Ed disappeared with $1,300 collected from customers and $600 worth of supplies, which he had bought using the business credit account on behalf of the business from their regular supplier. At about the same time, George negligently broke a customer’s $200 lamp when he was delivering a kite.
   1. What kind of business organization is this? Prove it.
   2. For which of the following can Dave be held fully liable? Explain.
      1. The broken lamp
      2. The $600 for the supplies
      3. Business debts

Answer 1

1.The business was established by Dave,Christa and Ed with partnership of 35:35:30.All the partners were severally as well as jointly responsible for the profit or loss in the business. This is the property of partnership organization.

Hence,mentioned entity is a partnership organization.

2. The Broken Lamp- The lamp was broken by the delivery boy, who is liable to pay the cost. Hence, Dave can't be held responsible for the same.

The $600 for supplies- Ed disappeared with supplies worth $600. Partnership is a legal entity and Ed is also a partner in the business. For any loss or malpractice conducted by him,other partners are equally responsible. Hence, Dave will be held responsible for the $600 supplies.

Business Debts- Ed disappeared with $1300 which he collected from the customers causing business debts. All the partners will be responsible for this debt and hence Dave will also be held responsible for the same.