Question

Jerry and Benny devised a formula and process for producing extraordinarily good ice cream. Jerry and Benny decided to market their product, "Texas's Best Ice Cream," and divide the profits 60% to Jen, 40% to Benny. Benny and Jerry had no oral or written partnership agreement. Jerry and Benny:

A)	would divide losses equally, should losses occur in the future.

B)	will be deemed a partnership in most legal respects.

C)	must enter into a written agreement should the business last more than one year.

D)	need not pay Social Security taxes or Self Employment taxes since they are not incorporated.

Answer 1

Solution

Since there is no oral or written partnership agreement Jerry and Benny

A)	Would divide losses equally, should losses occur in the future.

In the absence of written agreement profits and losses must be shared equally.

As there is no written agreement it is not deemed a partnership in legal respects.

It is always preferred to enter into written agreement from the very beginning of the partnership

Whether they are incorporated or not they have to pay social security taxes or self-employment taxes.