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A partnership was approached by a corporation that would like to acquire them by a stock...

A partnership was approached by a corporation that would like to acquire them by a stock acquisition. The partnership has no authorized stock, and the corporation does not want to pay cash for the partnership. The partnership is valued at $4,000,000 today. Reading the partnership agreement, you find that the partnership can be terminated at any time with the consent of the partners. They do not want to dissolve the partnership. The corporation very much wants to purchase the partnership. In your expansive knowledge of accounting, what would you suggest the partnership do, as well as the corporation to make this consolidation happen? The only solution involves consolidating the partnership and the corporation. How would you, the accountant, resolve this issue?

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Expert Solution

A partnership can be acquired by a corporation,but then it cease to be a partnership.

The following may be ensured before acquiring the partnership firm by the corporation :

(1) Check whether MOA of the company empowered it or not.

(2) Consent of all partners obtained or not.

(3) All statutory due of the partnership have been disbursed or not.

(4) Proper valuation of the partnership done or not.

(5) Appropriate resolution for the sake has been passed or not.

(6) Consent of the creditors has been taken or not.

(7) How adjustment of assets and liabilities of the partnership to be adjusted.

(8) How partner's account/settlement disbursed.

If the partnership concern is taken over by the corporation as a going concern with all it's assets and liabilities, the existing partners should hold more than 50% of the voting shares of the new company in the same ratio as per their shares in the partnership firm. There should not be any sale or transfer of these shares in the next 5 years. There should not be any dilution of the percentage of these shares in the next 5 years.

ekkarill92 answered 1 year ago
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