Question

The students in ACCT class (also known as “the fabulous fifteen”) decide to form a partnership in order to start a business that researches mergers and acquisitions and sells their analysis to investors via a monthly report. Further, they decide to split the responsibilities of the partnership into three different areas as follows:

• Five of “the fabulous fifteen” invest the majority of the capital needed to get the business started, but do not want to be involved on the daily operations.

• Five other members of “the fabulous fifteen” have extensive experience in analyzing mergers and acquisitions and plan to perform the majority of the daily work.

• The remaining five members of “the fabulous fifteen” believe they provide the most value to the new partnership by marketing the monthly report to their investment contacts.

Required

Write a memo to the other members of “the fabulous fifteen” proposing two different ways the partnership can fairly allocate the profits of the partnership among the three different groups of partners identified above. Feel free to be creative, but please make sure your proposals are at least somewhat realistic.

Answer 1

Partnership Memo

This Profit Sharing Agreement is entered into as of 08-12-2018 by and between [The Fabulous Fifteen] having its principal place of business located at Sollingnalur, Chennai. The Fabulous Fifteen consists of 15 partners and all 15 members agree to be bound by this Agreement.

WHEREAS, the Company has developed a business that researches mergers and acquisitions and sells their analysis to investors via a monthly report.

WHEREAS, the Company Further decides, they decide to split the responsibilities of the partnership into three different areas as follows:

• Five of “the fabulous fifteen” invest the majority of the capital needed to get the business started, but do not want to be involved on the daily operations.

• Five other members of “the fabulous fifteen” have extensive experience in analyzing mergers and acquisitions and plan to perform the majority of the daily work.

• The remaining five members of “the fabulous fifteen” believe they provide the most value to the new partnership by marketing the monthly report to their investment contacts.

NOW, THEREFORE, in consideration of the mutual covenants and promises made by the parties hereto, the Company and the Representative (individually, each a “Party” and collectively, the “Parties”) covenant and agree as follows:

1. TERM.

This Agreement shall last from the date of execution until terminated by thirty (30) days’ written notice by either party.

2. EFFECT OF TERMINATION. Upon termination according to section 1, the following shall occur:

1. The Representative shall continue to receive the profit share described herein from any continuing sales as a direct result of the Representative’s efforts;

2. The Representative shall direct all further inquiries regarding the Product back to the Company;

3. The Representative shall return or destroy any physical or digital copies of the Company’s proprietary information in its possession including (but not limited to) marketing material, business plans, customer lists, and pricing information.

3. RESPONSIBILITIES OF REPRESENTATIVE. In consideration for the profit share granted herein, the Representative shall perform the following duties:

1. Performing research and other prospecting duties with regard to potential customers;

2. Completing paperwork as needed; and

3. Performing other such duties and services as may be assigned by the Company to accomplish the aims of this Agreement in the time, place, and manner deemed appropriate by the Representative.

4. PROFIT SHARE. In consideration for the duties performed hereunder, the Representative shall be entitled to [PERCENT] of the profits earned for sales of the Product that are a direct result of the Representative’s efforts.

1. To be considered a “direct result” of the Representative’s efforts, substantially all of the contact with a customer that leads to a sale must have been made by the Representative. Although initial contact and contact at the sale point shall be factors to consider, they are not determinative of such sale being a “direct result” of the Representative’s efforts.

2. “Profits” are deemed to be calculated by the sale price less any expenses by the Company paid on behalf of the Representative in furtherance of the sale and the cost of goods sold.

5. INDEPENDENT CONTRACTOR. The Parties agree that the Parties shall be considered independent contractors and not agents or employees of the other Party. Neither Party shall have authority to make any statements, representations or commitments of any kind, nor to take any action which shall be binding on the other Party, except as may be expressly provided for herein or authorized in writing.

IN WITNESS WHEREOF, each of the Parties has executed this Consulting Agreement, both Parties by its duly authorized officer, as of the day and year set forth below.

The Fabulous Fifteen

Miss. Shah (Representative)