Structure of New Venture - Essay Example

Their compensation will be considered as their investment and the share will be proportional to the total investment of the partnership company/venture. After all, mere financial investment cannot run a business. There should be someone to look after the business. In the present problem the two members who have agreed to put in their hard work have to be compensated equally or as per the terms put in the partnership deed. The contributions of the members shall be the capital of the firm. If any further capital or loans or deposits are required by the firm to meet its expenditure then such loans/deposits/capital shall be arranged or invested or even contributed by the partners.

These investments if made by the partners will amount to an additional percentage of shares to be held by them. Also at the end of the accounting period, the partners are liable for interest at 18% per annum or as prescribed under Section 40(b) (iv) of the Income-tax Act, 1961 or under any other Act applicable, on the amount standing at their credit. Such interest paid will be considered as an expenditure of the firm and will be debited to the profit and loss account of the firm before the divisible profit/loss is calculated.

The two partners who have agreed to put their heart and soul into the business will have to be paid remuneration as laid down under section 40(b)(v), which is read with 3rd explanation of the Income-Tax Act, 1961. The remuneration will be distributed among the two partners in an agreed percentage. The partners are also eligible to revise the method of calculating the remuneration as agreed to by and among the partners from time to time.The partners will have to form a board of directors and elect a member as a Managing director who will look after the whole business.

The Managing Director will be responsible for the acts of the partners collectively or individually in the conduct of the business.Meetings have to be conducted at regular intervals and the partners will have to attend the meetings. An agenda has to be prepared before every meeting lying down in clear terms as to what is the purpose of the meeting and what the discussions that would be held at the meetings. The holding of shares of each partner will be based on the number of investments that they bring into the business.