1. a) In their general partnership agreements, Koch and his future partners need to specify profit sharing arrangements, management and control policies, and transferability of the partnership (General, 2006). Because different partners may have different visions or goals for the business, have an unequal commitment in terms of time and finances, and the fact that personal disputes can occur, general partnership agreements should be drawn up with the guidance of legal counsel and must be signed by all partners (Advantages, 2006). They should also specify a means of dissolving the partnership if a partner dies, becomes disabled or wishes to leave the business.
b) There are several advantages to general partnerships which Koch and his future partners should be aware of. These include shared financial commitment; the ability to pool resources, expertise and strengths; limiting of start up costs; and few formalities in setting up the partnership (Advantages, 2006). The partners share assets, profits, liabilities and the management of the business. General partners are taxed in the same manner as sole proprietors, so that each partner can include business income on his/her personal income tax return, and each partner can deduct pro rata losses from the business on their own individual tax return. General partnerships are usually less expensive to establish and require less paperwork and formality than corporations.
c) Koch and his future partners should also be aware of the disadvantages associated with general partnerships. Each partner is usually personally responsible for business debts and liabilities incurred (Advantages, 2006). Each partner may also be held liable for decisions and actions of the other partner(s). Disagreements may arise between partners regarding management plans, operational procedures and each partner's individual vision for the future of the business. General partnerships often have difficult...