Sheila and Rob Mutually Decide to Start a Business Together

question 15

Essay

Sheila and Rob mutually decide to start a business together. Being close friends, they do not enter into a written agreement and agree to split all responsibilities and profits equally. However, Sheila soon finds herself saddled with more than her share of work. She now resents splitting the profits equally since her contribution to the business is more. This has affected Rob and Sheila's friendship. What form of business organization is followed by Rob and Sheila? What should they have done to prevent any misunderstandings between themselves? Can Sheila legally claim a greater share of profits?

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Definitions:

Asset Revaluation

The process of adjusting the book value of a company's assets to reflect their current fair market values.

Dividends

Payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

Surplus

The amount by which revenue exceeds expenses in a given period, indicating a positive financial state.

Share Option

A right granted by a company to its employees or executives to purchase shares in the company at a preset price, often used as part of compensation packages.