(Done Paper) Referencing Styles : Harvard Question BDoes Craig appear to be doing anything wrong? Explain your response.PARTNERSHIPIn this situation, it does ap

(Done Paper) Referencing Styles : Harvard Question BDoes Craig appear to be doing anything wrong? Explain your response.PARTNERSHIPIn this situation, it does ap

Question BDoes Craig appear to be doing anything wrong? Explain your response.PARTNERSHIPIn this situation, it does appear that Craig is doing something wrong.According to Hoggett, et al. (9th edition), a partnership is defined as a relationship that exists between two or more persons carrying on a business in common with a view to making a profit.In this situation, the two partners are Craig Fraser and Michelle Mason. They run a small business in retail. When they set up their business, Craig c … View More Question B Does Craig appear to be doing anything wrong? Explain your response. PARTNERSHIP In this situation, it does appear that Craig is doing something wrong. According to Hoggett, et al. (9th edition), a partnership is defined as a relationship that exists between two or more persons carrying on a business in common with a view to making a profit. In this situation, the two partners are Craig Fraser and Michelle Mason. They run a small business in retail. When they set up their business, Craig contributed $60 000 and Michelle contributed $50 000. After two years, Craig withdrew $40 000. DISTRIBUTING THE PROFIT Two facts seem to be unfair in this case. First of all, the distribution of profit was based on the initial capital contribution, which is 55% for Craig and 45% for Michelle. However, two years later, Craig’s capital is reduced to $20 000 (from the initial $60 000), which become only 29% of the business. Nevertheless, as it was previously decided, Craig is still getting 55% of profit and Michelle 45% only, even though she owns 71% of the business. As stated by Kruse, 2013, it is indispensable to discuss and agreed on a mutual agreement at the beginning of a partnership. This partnership agreement must review each partner’s obligation, engagement, dedication and distribution of profits. According to McBride, 2017, distributing the profit is often based depending on each partner’s capital contributions and responsibilities. When considering the contribution factor, partners must divide the profits according to the proportion of their capital contributions at the last day of the previous period. However, the distribution of profit only depends on the initial contribution in this situation, which seems to be unfair as one partner has withdrew two third of his contribution after only two years. TRUST IN PARTNERSHIP The second fact that seems unfair is the fact that Michelle does not have the knowledge in accounting and finance as Craig does. Because of her lack of knowledge she decided to trust Craig with the financing department. Craig is aware that Michelle gave him her trust and uses it against her, as only Craig made the decision on how to distribute profit, without Michelle’s opinion. According to Burns, 2012, friends or partners should not trust each other concerning the financial aspect. If one partner lacks of knowledge in one particular field or area, especially in the financial and accounting department, this person should appeal to legal services’ advices in order for him or her to acquire the necessary and essential skills and ability. Both partners should always be aware of the financial situation of the business in order to avoid abuse of trust and unethical behaviour. In this situation, Craig has not acted illegally as Michelle decided to ignore the financial aspect of her business by trusting Craig. However, Craig’s behaviour is not ethical as he is abusing of Michelle’s trust and ignorance.

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By | 2018-08-25T17:29:05+00:00 August 25th, 2018|Business|