[Partnership Problems] Jamar, Kenya, and Tamika Want to Form a Partnership

question 57

Multiple Choice

[Partnership Problems] Jamar, Kenya, and Tamika want to form a partnership to sell students resume preparation and employment search services. Jamar asks Kenya and Tamika if they should draw up some sort of agreement. Kenya replies that a written agreement is not legally required and that an oral agreement will set up a partnership. Upon the urging of Jamar and Tamika, however, Kenya agreed to a written document setting up the partnership, which they all signed. It was a simple agreement listing the partners and did not specifically address the right to management or allocation of profits and losses. Kenya has an opportunity to assist some students with resumes and does so without revealing her employment to the partnership; she keeps the payment she receives for herself. When Jamar and Tamika find out, Kenya replies that she was doing two-thirds of the partnership work, particularly in regard to management; that she, therefore, has two-thirds of the voting rights; and that she voted that her actions were appropriate. The articles of partnership does not address the right to share in management, but Jamar and Tamika strongly disagree with Kenya.
-Is Kenya's statement that she had greater management rights because she was doing a greater percentage of work for the partnership correct?

• A) No, Kenya is incorrect because unless otherwise stated in the articles of partnership, all partners share equally in the management of the partnership.
• B) No, Kenya is incorrect because unless otherwise stated in the articles of partnership, partners share in management rights in proportion to their rights to profits.
• C) No, Kenya is incorrect because unless otherwise stated in the articles of partnership, partners share in management rights in proportion to their obligation for losses.
• D) Yes, Kenya is correct only if the proportion of work she was doing was inequitable.
• E) Yes, Kenya is correct only if she can establish that the other partners are guilty of mismanagement in such a significant manner that a breach of fiduciary duty has occurred.

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Definitions:

Benefits

Advantages or payments provided typically by employers or government programs to support well-being, such as health insurance or pension.

Vertical Contracts

Agreements between firms at different levels of the supply chain, such as between a manufacturer and a retailer.

Costly Activities

Actions or tasks that require significant expenditure of resources, such as time, money, or effort.

Extended Inventory

An expanded list of goods and materials kept on hand by a business, including raw materials, work-in-progress, and finished goods.