Corporations Law Essay Example | Topics and Well Written Essays - 2000 words

Corporations Law - Essay Example Although the venture is doing well, there are some matters that are starting to concern them. One of their good friends who had also created an application similar to ChitChat was sued by an employee for negligence and a footballer for defamation. The court’s decision favored both the employee and the footballer and the application creator ended up losing the application as well as her house and cars. The three friends, Lauryn, Nicole and Elizabeth, are scared that the same might occur to them, and they may lose the application as well as their personal property. The three friends are also unsure on how to sign contracts with suppliers and especially if they will all be liable for a contract entered into by one of them. Additionally, they have heard that other developers are raising money to fund other ventures, and they would also like to be able to raise funds to finance other applications they are working on. The three are unsure of the most appropriate business structure t hey should adopt. Issue The three friends would like to enter into a formal business organization that would allow them to manage and operate the activities of ChiChat effectively. The three friends are concerned about the legal liability of the undertaking particularly the extent of their individual liability in the venture and as such would like a business structure that will address this issue. ... A partnership agreement can be written or oral; however, if the partners wish to make their arrangement positively clear and enforceable it is prudent to draw up Articles of Partnership. Formally partnered entities can easily be made public through press releases, advertisements or public records. There are several types of partnerships, and they include general partnerships, limited liability partnerships and limited partnerships. In a general partnership arrangement, all partners manage the company and are personally accountable for its liabilities (Mayson, French, & Ryan, 1989 p. 19). In a limited partnership, some limited partners relinquish their management role in the partnership, in substitute for limited liability for the partnerships liabilities. The other type of partnership is the limited liability partnership where all the partners have some degree of limited liability for the liabilities of the partnership (Sealy, & Worthington2007 p.115). Liability Every individual in t he partnership undertaking are both an agent and a principal of the partnership and may, therefore, bind the other partners and the firm. This implies that each partner is jointly and severally accountable for the debts of the partnership, which include the share of the partner’s risks as well as being liable for the risks of the partnership in its general course of business. The liability of a partner to a business is, therefore, unlimited in respect to a general partnership. In limited partnerships, the liability of a partner is limited to some degree (Morse, 2010 p. 24). It is also noteworthy that, in limited partnerships, the limited partners cannot take part in the operations of the partnership for their liability to remain limited. Lauryn, Nicole and Elizabeth’s