Grade 12__ Student’s Name:____________________________ Date: ________

Unit 2- Chapter 7.1 “Sole Proprietorships and Partnerships”

CASE STUDY
Directions Read the scenario and answer the questions that follow.
Situation: Amar and Adina had known each other for a long time. Adina wanted to open a store
featuring original wood carvings. She also wanted to sell tools and other carving products. She
knew that Amar was a good wood carver, but he had little interest in running a business. However,
Amar had the resources needed to begin such a business. With Adina’s business sense, knowledge
of the field, and enthusiasm, she knew she could make it work. All she needed was Amar’s interest
in wood carving, his contacts with other carvers, and his financial resources. When Adina
approached Amar with the idea, he was interested but a little skeptical. She had suggested that
he become a limited partner so he would not have to be involved with running the business. Amar
wanted more. He wanted a full partnership, with its shared responsibility for decision making.
They seemed to be at odds until Adina presented a solution.
1- Why do you think Amar was not happy when Adina suggested that he become a limited
partner?

Amar was not happy when Adina suggested that he become a limited partner because:
 He cannot incur obligations on behalf of the partnership.
 He will not be able to participate in daily operations, or manage the operation. All the
operations will be manage and command by Adina.
 He cannot manage the business with his ideas and experience, but Adina can do so.

2- What do you think Adina’s solution was?

Adina can solve this problem of partnership with Amar by offering him to work as a General partner so
that Amar will be able to participate in daily operations, or manage the operation and he will be able
manage the business put his ideas, opinions, and experience in the business.

You are now Amar and Adina’s attorney. They have asked you to draw up a partnership
agreement for them. Using the headings that appear on the following two pages as a guide,
develop a partnership agreement that you believe Adina and Amar would sign. You will need to
use your imagination in developing this contract.

a) Name of Business: ‘AmDina’ original wood carvings.

b) Purpose: Partnership agreement (Partnership Deed) between Adina and Amar
c) Duration of Agreement: 36 months
d) Character of Partners (general or limited, active or silent): General Partnership of 50% in all,
profits or loss.
e) Business Expenses (how handled): All the internal and external expenses related with the
business will be divide equally in both partners.
Grade 12__ Student’s Name:____________________________ Date: ________

Unit 2- Chapter 7.1 “Sole Proprietorships and Partnerships”

f) Division of Profits and Losses: 50% of from the net profit will be divided in both partners, and
loss will also be divide equally in both partners.
g) Salaries: There will be no Salaries for both the partners, only 50% of from the net profit will be
divided in both partners.
h) Death of a Partner: In case of the death of the partner, his/her family will be eligible to
withdraw the partnership agreement by taking the amount which will half of the worth of the
business, as in the beginning of the business both of the partners invested equal amount to start
the business.
i) Handling of Business Disagreements: Any disputed matter will be solve with mutual consent
but in case of disagreement from 1st partner, the 2nd partner will be authorized for eliminating
the partnership by giving 1st partner 40% of his rights.
j) Other Additions (anything else that you think should be included): Agreement will be valid up
36 months, before that no partner can withdraw, quit or discontinue partnership. With the
mutual consent partnership can be dissolved anytime.