Business Venture - Fabulous Fabrics Partnership - Assignment Example

Business Venture Name: Institution: Nature of the business Fabulous Fabrics Partnership is a business venture formed to supply the latest and the most fashionable fashion wear for all seasons. The venture will store ladies wear and menswear including suits, dresses, skirts, dresses tops and other garments. In consideration of a niche market that loves uniqueness and originality, the venture will have a department with competent designers that will design clothes according to the client’s tastes and preferences. In this section the store will stock high quality fabrics that cut across the continents fabrics. This will include Asian and African fabrics. The store will also store shoes and accessories like jewellery handbags and rings. The jewellery section will also include the Asian and African preferences so as to satisfy the niche market whose tastes and preferences are inclined towards this .The business venture will also have a section that deals with designer colognes and perfumes to complete the client’s day wear. The business venture is set after considering the niche market that includes a diverse range of clients. The first clientele group is the people with an average income or the middle class society. The business venture will stock most of the merchandise based on this class based on the fact that they are the largest composition at the location of the venture. The high income earners are also a target group especially in the accessories department as the venture will stock high quality products. The business venture stocks this wide variety of products so as to ensure that it’s a one stop shopping mall for clothes and accessories. This is a strategy to increase sales as the speculation is that clients will always buy accessories to match their wear. Legislation affecting the business The Partnership Act of 1890 and the amendments thereof determine the existence of a partnership company1. The Fabulous Fabrics partnership must fit into the description that is given in chapter 89 sections 1 of the act. This implies the partners must have a motive of making profit as stated. Section 42 subsection 1 spells out the action that should be taken in case of the death of a partner2. The section states that such a member should be entitled to a share in the settlement of the final accounts. The same section also gives similar conditions in case of a member ceasing to be part of the partnership. The legislation requires that the partners should fill an individual Self assessment tax return the partners the supplementary pages of SA104. The partners should nominate a partner who should file a Partnership Return –SA800 that shows each partner’s share of profits or losses. The legislation also states that any act or instrument relating to the business that is done in the firm name or done with an intention to bind the firm done by an authorized person is binding on the firm and on the partners. The legislation states that every partner is jointly liable e with the other partners for all the debts and obligations incurred by the firm while he is a partner. When a partner commits an act of omission that is wrongful in the course of the firms business that causes loss or injury to a person who is not a partner in the firm the firm is liable in the same extent as the partner omitting the act3. The firm is meant to make good the loss where a partner acting within the scope of his authority misapplies money received from a third party. The legislation also states that a partner who is admitted into an already existing firm does not become liable for partnership debts. A retiring partner does not cease to be liable for the debts of a firm that are incurred before his retirement. The mutual rights and duties of partners may be varied when all the partners come into consent about the same4. The legislation also states in section 23 that a writ of execution shall not issue against any partnership property except in judgment against the firm. It also states that all the partners are entitled to share equally in the profits, losses and capital of the business and they must also contribute equally towards the same. The partnership agreement The three partners will formally get into a partnership agreement that will serve as a contract between the partners. It will lay down all the terms and conditions for the initiation, running and termination of the partnership. The main clauses in the partnership deed will include name clause that shall bear the name of the business which is Fabulous Fashions Partnership. This clause shall also include the products that the partnership shall offer. There shall also be a term clause that shall indicate the day when the business venture will begin its operation. This clause shall also indicate that the business venture will be viable until the day that it shall be terminated. Capital clause The capital clause shall indicate the amount of capital that is needed to initiate the business venture and the sources5. In this case the three partners shall each contribute an amount of $50,000. The entity shall also use trade and supplier credit. This arises due to the fact that the business will deal with the original supplier’s of some items like the jewellery and accessories. The partners have already negotiated with the suppliers who have provided a positive report concerning the same. The suppliers of the African and Asian fabrics will also offer their p roducts on credit to receive their payment gradually as the sales progress. In this clause, the nature and maintenance of the capital accounts shall be described. In Fabulous Fabrics business venture a separate capital account shall be maintained for each partner. Further the clause shall include the fact that the partners are not allowed to withdraw any amount of from their capital accounts. The clause shall also indicate that that the capital accounts of the partners shall be maintained at all times in the proportion which the partners share their profits and losses. Profit & loss clause The partnership agreement shall have a profits and loss clause that shall indicate the way profits and losses shall be shared among the partners6. In the partnership the net profits shall be shared equally among the partners and the losses borne equally by all the partners. The clause shall further indicate that he profits and losses shall be charged or credited to the partner’s income accounts. In case of a loss and a partner fails to have a credit balance in their income account the amount shall be charged to their capital accounts7. Salaries and withdrawals clause The partners in the business shall not receive any payment for their services in the enterprise. The partners in the venture are however allowed to withdraw the credit balance that is in their income accounts. Interest /Duties clause There shall also not be any payment of interest to the partners for the contributions they made as the initial capital of the business venture. This statement shall also apply for any subsequent capital contributions that the partners shall give. The Duties clause shall on the other hand define the management and the duties that the partners are entitled to in the running of the business venture. It shall also spell out the restrictions and the no go zones for the partners in the business management. Fabulous Fabrics partners’ shall be entitled to equal rights in the management of the business affairs. The partners shall contribute their entire time towards the running of the business. No partner shall borrow or lend money on behalf of the partnership without the consent of all partners8. The clause also spells out that no partner shall make, deliver or accept any commercial paper or execute any bond lease or mortgage agreement for or of the partnership. The partners shall only engage in such an activity when dealing with the normal assets sold in the course of normal business. Banking/ Partnership books The banking clause spells out that the partners shall designate the checking accounts where all funds in the partnership shall be deposited. Withdrawals shall also be made upon checks that are signed by either of the partners. The Partnership books clause on the other hand indicates that all partners shall have access to the books of the partnership. The books shall be maintained at the main office of the partnership and they shall be maintained on a fiscal year basis. The clause also indicates that the books of the business venture shall be balanced and closed at the end of the fiscal year. It also indicates that the books will be audited by an external auditor on the date upon the closing of a fiscal year. Voluntary termination clause This indicates that the partnership may be terminated anytime at the wish and agreement of the partners. Upon such an agreement the partners shall promptly liquidate the venture’s assets .The partnership name will be sold with the assets that are within the premises. The assts shall then be distributed inn the following order: To pay for all partnership liabilities, obligations and liquidating expense. To equalise all the partners income accounts To discharge all the partners income accounts To equalise the partners capital accounts To discharge the capital accounts balance to the partners. Death clause Upon the death of a partner the remaining partners shall have the rights to purchase the rights of the deceased in the business. In this case the surviving partners will have to serve notice in writing the election within three months after the death of the partner’s9. The purchase price of the deceased interest shall be equal to the decedent’s capital account at the time they died plus the value of the descent’s income account at the end of the previous year’s fiscal year. This amount shall be increased by the share of the descents profit or decreased by their loss for the period from the beginning of the fiscal year to the end of the month on which the person died. The amount will also be decreased by any withdrawals that are charged in the income account of the deceased during the same period. They will also have the right to terminate and liquidate the venture. This shall follow the same procedure as the one stated to in the termination clause. Arbitration clause Any controversy arising that relates to this agreement or the breach of he above conditions shall be settled in accordance to the rules provided in the United Kingdom Arbitration Act. Judgement upon the award offered may be entered in any court that has jurisdiction thereof. Legal aspects of planning Advertising law In planning to advertise the business the law requires that there be truth in advertising. The partners must therefore be able to plan an advertisement that makes good their claims as the law protects the citizens10. Employment and labour law There are state laws governing the employees that will be employed in the business entity. These include the wages the employees will be entitled to and the benefits. The laws also prohibit harassment and discrimination of workers11. Employment law reforms require the business owners to sign Employment eligibility verification forms. Bibliography Wiliam, HS, The practice of conveyancing.Routledge,London,2006,pp 37-65,78. Leone,LS,International commercial law:Being the principles of mercantile law.Cengage Learning,USA,2004,pp 130-140. Campbell,CD,Legal aspects of doing business in Europe. Routledge,London, 2001 ,pp 100-123. Binmore, GA, Rules and regulations governing the establishment of a partnership business. London: Routledge,2003,pp 23-56 Irving, BA ,business contracts:sole proprietorships and partnershipos. John Wiley and Sons,USA,2009,PP 3-6. Michael, HF, Business studies: concepts in partnerships. Florence,Cengage Learning Florence, 2009,pp76. Richard, D, 1998 Reason and Justice. Addison-Wesley. London,1998, pp 78-90. HM ,Partnership Act 1890 Rules for determining existence of partnership,2011,retrieved 9 March 2011, Appendix A.Names of the partners I. John Lee II. Isaac Leonard III. Dennis Murphy B.Partnership Agreement Deed Partnership agreement For Fabulous Fabrics Upon valuable consideration the persons named below as partners hereby covenant and agree to be bound by the following agreement dated March/09/2011. 1.0 Name and Business 1.01 John Lee, Isaac Leonard Dennis Murphy hereby form a partnership under the name of FABULOUS FABRICS to deal in the sale of Fabrics and accessories. 1.02 The principal office of the business shall be 900087-788900,Way Wood Street, London. 2.0 Term 2.01 The partnership shall commence its activities on march/24th /2011, and shall operate until terminated 2.02 The capital of the partnership shall be contributed in cash by the partners as follows: John Lee $ 50,000 Isaac Leonard $ 50,000 Dennis Murphy $ 50,000 2.3 A separate capital account shall be maintained for each partner. 2.4 Partners shall not withdraw any part of their capital account. 2.5 The capital accounts of the partners shall be maintained in the proportions in which the partners share in the profits and losses of the partnership. 3.0 Profit and Loss 3.01 The net profits and not losses of the partnership shall be shared and borne equally among the partners. 3.02 Each partner shall have a separate income statement maintained in their name 3.4 The profits and losses in the partnership shall be charged to each partner’s income statement 3.04 losses shall be charged in the partners capital accounts incase they have no credit balances in their income accounts. 4.0 Salaries and Withdrawals 4.01 partners shall not receive any salary for the duties performed in the partnership 4.2 The partners are allowed to withdraw money once in a while from their income accounts. 5.0 Interest interest shall not be paid on the capital contributions by the partners. 6.0 Management Duties and Restrictions 6.01 the partners shall have equal rights in the management of the partnership. 6.2 Partners shall devote their entire time to the conduct of the business. 6.3 No partner shall lend or borrow money on behalf of the partnership without the consent of the members, 6.4 No partner shall accept any commercial paper bond or lease on behalf of the partnership other than the products in the normal running of the business activities. 7.0 Banking 7.01 funds of the partnership shall be deposited in fabulous fabrics name .one of the partners shall have to provide their signature in such deals. 8.0 Books 8.01The books of the partnership shall be maintained in the partnerships main office and each partner shall have free access to the books. 8.02 The books shall be maintained on a fiscal year basis and the accounts thereof shall be closed and balance d at the end of the year after which an external audit shall follow. 9.0 Voluntary Termination 9.01 the partnership shall be dissolved when the partners agree. 9.02 The partners shall on termination of the business liquidate the assets of the organization promptly. Pay for partnership debts and obligations Discharge any balance to the partners income statements To equalize the amounts in the partners capital accounts To discharge the balance to the capital accounts of the partners 10.0 Death 10.1 When a partner dies the other partners can purchase the interest of the partner by writing an election of the above within three months of the partner’s death. He can also choose to terminate the business. 10.2 Incase he wants to purchase the interest of the descent he shall pay a price worth the descents share. 11.0 Arbitration 11.01 any controversy on the above shall be settled according to the United Kingdoms arbitration act and the award offered may be presented in court .in witness whereof the parties have signed the agreement. Signature of Party 1 Signature of Party 2 Signature of Party 3  John Isaac Dennis Read More