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PDtax
PDtax, Master's Degree
Category: Business and Finance Homework
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Experience:  MBA/CPA, Former college instructor and tutor.
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a. Case Analysis – The X-Partnership becomes insolvent due

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a. Case Analysis – The X-Partnership becomes insolvent due to mismanagement and cannot pay its liability to Y-Corp. Y-Corp proposes to manage the partnership business, with the agreement that 50 percent of the net profits will be applied to the payment of X-Partnership’s debt to Y-Corp. X-Partnership agrees to the management contract.

PDtax :

Welcome to the site. I'm PDtax, and will be helping you.

PDtax :

to Q & A...

Hi Gene,

I am looking into a few factors, but my initial thought is that the arrangement is fine. A vendor can offer services in exchange for a percentage of income without being a partner. It's a compensation arrangement only.

Y corp can legitimately offer to perform services in exchange for debt repayment. This is what i wanted to look into; there is no additional compensation being offered for the services. Debt repayment doesn't normally require contribution of services. Let me look into this a bit more.
Customer: replied 3 years ago.

Hello PDtax:


 


Thank you for partially answering my question. I will appreciate very much for you coming back to me for the remaining answer to my 3-part question.


 


The right answers will serve as my review for my upcoming exam in legal aspects of business. I like the fact that you came back to me promptly even without the complete answers, that makes it promising to subscribe to this site's services after my trial period. Awaiting for the rest of the answers. Thank you.


 


Gene


 

c. Is the Y-Corp. considered a partner of the X-Partnership by the mere fact that it is receiving a share of the net profits?

No. A partner has the right to bind the partnership, which this financial arrangement does not provide. The partnership agreement would have to be amended to add a partner for that power to vest in Y corp.

Y corp is not accepting any liability for partnership debts, either, which is a crucial component of being a partner. Without that express agreement, Y corp will not be considered a partner.

Special care should be undertaken to insure that Y corp does not act like a partner. Signing X partnership checks or otherwise representing that Y corp is the partnership management should not be undertaken, as such steps would imply to others that Y Corp is indeed a partner.

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Customer: replied 3 years ago.

Please let me know your answer to Item B.


 


b. Can the Y-Corp. validly enter into the above management contract?


 


Thank you,


 


Gene

Yes, Y Corp. can provide services to the partnership to try and save its balance due.
Customer: replied 3 years ago.

Hello PDTax:


 


I need your expertise in answering the 2 following questions:


 


 


o 11. X writes B offering to sell a piece of land for P100,000, and at the same time receives from B a letter offering to buy the same land for P100,000. Is there a perfected contract? Explain.


 


2. A, B and C are partners in X Partnership. The partnership is dissolved by A’s death. B thereafter transacts business with D, a third person. The transaction does not refer to winding up of partnership affairs nor is it designed to completed transactions begun but not finished at dissolution. May the partnership be found? Explain.



Thank you. Gene


 

If you can post these to a new question thread, and ask for me in the subject line, I will be glad to assist.

PDtax

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