Donald Wilson has a great deal of experience with respiratory therapy. James Smith has the business...

Donald Wilson has a great deal of experience with respiratory therapy. James Smith has the business connection and knowledge. They have decided to start a partnership that sells respiratory equipment, employing several sales representatives. They have decided to share equally in the net income and net losses. After two years, the business is thriving having sold more than 1,000 units this year. One day, Donald receives a call from the Internal Revenue Service (IRS). Unknown to Donald, James has not paid the payroll taxes for last year and is behind on the payroll taxes in the current quarter. Donald learns that James has a gambling problem and there is insufficient money to pay the IRS. James has no personal assets that can be confiscated. What are Donald’s options for the resolution of the IRS problem? What is Donald’s liability? What actions should Donald have taken prior to the partnership agreement?

Expert Solution

IN THE GIVEN QUESTION DONALD WILSON HAS A GREAT DEAL OF RESPIRATORY THERAPY AND JAMES SMITH HAS THE BUSINESS CONNECTION AND KNOWLWDGE.THEY STARTED A PARTNERSHIP TO SALE RESPIRATORY EQUIPMENT WITH AN AGREEMENT TO TAKE PROFIT AND LOSS EQUALLY.

DONALD KNEW THAT JAMES HAS A GAMBLING HABIT AND HE DIDNOT PAID THE PAYROLL TAXES AND THERE IS INSUFFICIENT MONEY TO PAY THE PAYROLL TAXES.BESIDES THAT JAMES HAS NO PERSONAL ASSET THAT CAN BE CONFISCATED.

NOW DONALD HAS AN OPTION OF PAYING PAYROLL TAXES FROM HIS PERSONAL ASSET AND RECOVER IT FROM JAMES AFTERWARD.IN PARTNERSHIP PARTNERS LIABILITY IS UNLIMITED THAT MEANS PARTNERS ARE LIABLE TO PAY THE DEBT FROM THERE PERSONAL PROPERTY .

IN THE GIVEN SITUATION JAMES HAS NO PERSONAL ASSET THAT MEANS DONALD HAS TO PAY THE PAYROLL TAXES FROM HIS PERSONAL ASSET. DONALD SHOULD CHECK JAMES FINANCIAL STATUS HIS PROPERTY HIS HABITS BEFORE ENTERING INTO PARTNERSHIP WITH JAMES.

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