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Business LibreTexts

15.1: Introduction

  • Page ID
    2840
  • Chapter Outline

    15.1 Describe the Advantages and Disadvantages of Organizing as a Partnership

    15.2 Describe How a Partnership Is Created, Including the Associated Journal Entries

    15.3 Compute and Allocate Partners’ Share of Income and Loss

    15.4 Prepare Journal Entries to Record the Admission and Withdrawal of a Partner

    15.5 Discuss and Record Entries for the Dissolution of a Partnership

    Photograph of three people sitting at a long table with building plans, calculator, and laptop.
    Figure 15.1 Partnership. Dale, Ciara, and Remi discuss operations of a landscape architecture company and need to decide on a business model. Should they choose a partnership? (credit: modification of “Business Meeting Architect” by “889520”/Pixabay, CC0)

    As a recent graduate of a landscape architecture program, Ciara is ready to start her professional career. Dale, her friend from high school, has started a small lawn mowing and hardscape business and wants to expand his services. Ciara and Dale sit down and work out that if they combine their talents, they will be able to take advantage of a growing need in their local housing market. They agree to form a partnership, and together they decide what each person will contribute to the business. Ciara has committed to invest cash, and Dale will contribute assets he has acquired in his business. In addition to the assets that each will provide, Ciara will contribute her expertise in landscape design, while Dale will contribute his experience in property maintenance and stonework/wood design and construction.

    They set out on their adventure, creating a partnership agreement and detailing the roles each will play in this newly created partnership. At first, business is great and they work well together. There is one problem: they have more business than they can handle, and they are getting requests for services they currently don’t provide. However, Ciara’s friend Remi is a pond installer. From speaking with Remi, she knows he is very dedicated and has a vast customer base. She realizes that if he joins the partnership, the company can handle all the business demand better. Therefore, Ciara and Dale decide to amend the partnership agreement and admit Remi as a new one-third partner.