A thorough investigation of the accessible business establishments is necessary when forming companies. The parties involved will be able to determine their responsibilities and liabilities with the proper information regarding the defined business structure, preventing future disputes within the company. (Henning, 2012).
In this situation, Adam, Laura, and Beth ought to start their company, Dazzling Doggies Day Spa, in collaboration. When multiple people band together to create businesses, each has the right to ownership. (Becker, 2017). The partnership document that governs its formation outlines the obligations and responsibilities of each partner. In this case, each partner is supposed to either buy in or make an investment in the enterprise (Henning, 2012).
A partnership is a composite or a multifaceted of many other business formations which individuals forming the partnership ought to be well informed. By recapitulating, they include the following: general partnership in which all parties are equally liable for all business activities, a limited partnership which limits the liability of partners and limited liability partnership which combines both features exhibited in general and limited organizations (Jones, 2014).
After having the above introduction to a partnership, Adam and Laura should now be advised on which type of the business to start. They need to form limited liability partnership. The category comprises of both general and limited partners (Jones, 2014). It is a business organization which involves at least one of the owners being actively involved in the management of the business as well as being individually liable for all debts or legal actions associated with it. The general partners in the business are charged with the responsibilities of running and overseeing all business operation besides contributing their capital (Becker, 2017).
Additionally, it consists of a limited partner(s) who only invest money in preference for future shares on the amount invested in the business. However, they do not participate in facilitating day to day running of the business nor are they personally liable for any loss incurred by the business like a company becoming bankruptcy. The cardinal advantage of the type of business is that some persons may only invest their money in exchange for shares but are entirely precluded from being liable for business activities (Jones, 2014).
Consequently, Adam and Laura are going to be general partners by being aggressively concerned with the daily management of the business. They have unlimited liability, and thus they will be personally reliable for all business undertakings. Conversely, Beth will be a limited partner in the partnership, and she will not concern herself with the business operations or being liable for business. She will only be entitled to shares (Henning, 2012).
Despite Adam being a general partner with unlimited liability to the business, he acts unethically by using business money to fund his expenses without disclosing it to other partners. It is a gross breach of a fiduciary duty which obligates him to act in the best interests of other partners (Becker, 2017).
To conclude, Adam, Laura, and Beth should simply form a limited partnership. It is unethical for a partner to secretly use business money for personal use without informing other parties as it contributes to a violation of fiduciary duty close which is protected in the partnership agreement.
References
Becker, C. U. (2017). Social Approach: Virtue Ethics Enabling Sustainability Ethics for
Business. International Handbooks in Business Ethics Handbook of Virtue Ethics in Business and Management, 1383-1394. doi:10.1007/978-94-007-6510-8_60
Henning, J. J. (2012). Partnerships - Limited partnerships and limited liability limited
partnerships. Amicus Curiae, 2000(31). doi:10.14296/ac.v2000i31.1366
Jones, S. (2014). Customising the Partnership - Standardising the Delivery: Driving mutual
benefits in outsource energy partnerships. Asset Management Conference 2014. doi:10.1049/cp.2014.1025
