Question

In: Operations Management

Harris, Pendleton, and McRae, certified public accountants, have operated their general partnership accounting firm since the...

Harris, Pendleton, and McRae, certified public accountants, have operated their general partnership accounting firm since the 19 70s. Thom Harris is 68 years old, Lee Pendleton is 66, and Roberta McRae is 65. They have operated their partnership by way of an old-school approach, a handshake agreement, since their professional association was first formed (in spite of strong advice from legal counsel to the contrary).

Harris has been acting rather strange in recent months. Clients and support staff have been asking questions. Six weeks ago, Harris was discovered standing on top of his desk singing the 19 70s Rick Dees tune "Disco Duck," interspersing quacking sounds throughout his rendition of the disco classic. Harris no longer wears conservative business attire; instead, he has opted for a light blue leisure suit with white patent leather shoes. Currently, he can be found again standing on his desk, this time offering up his version of the 19 79 Sister Sledge anthem "We Are Family."

Pendleton and McRae are in the conference room considering their options and the future of their accounting business. They would like to terminate Harris's partnership, but they are unsure whether they have the legal right to do so. They are also struggling with the notion of an ethical obligation to try to work things out with Harris; after all, he has been their partner for over 30 years. Finally, they wonder whether they could end their professional relationship with Harris, without being required to dissolve the existing partnership and wind up the financial affairs of the business.

  • Advise Pendleton and McRae of their legal rights: What are the reasons they can dissolve vs terminate a partnership?

Solutions

Expert Solution

Answer:

Advising Pendleton and McRae of their legal rights a below

A handshake agreement is generally a type of oral / verbal agreement between the partners. These three partners are running their general partnership based on the handshake agreement of partnership and they do not had any written partnership agreement between them.

· Legally, a partner can be removed from the general partnership; if he found breaching the partnership agreement. So in this case, if Harris found with breaching the general partnership agreement, then legally, Harris can be removed from the partnership firm by other two partners.

· Since this is a handshake agreement, then both partners can explore with current legal rules, if they can legally remove the third partner Harris with the absence of non written agreement.

· A legal notice can be issued to the Harris for his current behavior and acts and then based on the response against the notice, Harris can be legally removed from the partnership.

Following are the reasons they can dissolve vs terminate a partnership as below

· This is along business firm and had been running more than 30 years, so it should not be terminated. Hence it should be explored for dissolve.

· The two partners are working adequately and they are working in right direction for taking it further and create right strategies and business plan to achieve its targeted growth in the near future, hence it should be dissolved instead of terminated.

· This partnership has created right platform in last 30 years of time zone which can develop good business platform in near future, hence it should be dissolved and not terminated.


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