Discuss the ramifications of employing plan

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Tory, Becky, Hal, and Jere form TBHJ Partnership as equal owners. TBJH Partnership rents heavy tools and equipment. Becky and Hal are married to each other while Tory and Jere are brothers but are not related to Becky or Hal. Because Becky and Hal have other jobs, Tory and Jere are to be the full-time managers of the business.

Although Tory and Jere will run the business full-time, Becky will help in the store on weekends and some evenings. Hal will lend his financial expertise to the firm by doing the book- keeping and preparing the tax returns.
Even though the four have equal ownership interests, it is not clear how each owner is to be compensated so that there is equity among the partners yet rewards for those engaged in specific tasks.
Hal has told the others that they cannot receive deductible salaries. However, he suggests that guaranteed payments be made to each partner/employee for an agreed-upon amount based on the value of the services each provides and/or the time spent at the store.

Question 1: Discuss the ramifications of employing this plan and whether this is an equitable way to allocate compensation among the partners. What are the implications of this arrangement for the partners and the partnership?

Reference no: EM132451742

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