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Before starting to analyze the case, I would like to talk about partnership briefly. Partnership is a form of business ownership. It can be established by two entrepreneurs or by three or more. It is a more effective way of establishing business as our sources are limited. Moreover, combining two or more sources gives more opportunity to open a bigger and more profitable business. However, partnership can be jeopardized when one of the partners decide to leave the partnership. It is hard to determine a partnership worth as time and world is changing. Consideration of past and future is key point in measuring the worth of partnership and it is tough to define the real worth of company. In this case, Arthur and Nancy established a printing company which is partnership form of business ownership. Each of them put 40,000 to run the business. First two years of doing business resulted in lost of 10,000. As a result of this Nancy wanted to quit this business.
However, third year they made profit of 41,000 each. In spite of the profit, Nancy still wanted to quit the business. Arthur offered her 41,000 but Nancy wanted 80,000. The problem in this partnership is that they did not sign any contract. They did not negotiate the future of the business and liabilities of each one. As a partnership, before starting the business they should determine the responsibilities. They should try to see any cases before starting the business, growth or fail, and according to that set their responsibilities. Contract or negotiation has to include any actions that they will need to do in any kind of cases. For example, if one of the partners would like to quit company, what percentage of assets should he or she take in order to get his investment back. Also, tangible and intangible valuables need to be considered before starting partnership. In this case Arthur and Nancy did not take into consideration that their business can lose the money.
Usually first years of doing business, entrepreneurs lose money until some point. Nancy was not ready to face the loss. Therefore, she decided to quit business. The reason that Nancy asked 80,000 is that the company is started to make profits. She believes that company will worth a lot more than now in the future. But nobody knows how much will make their company next year. Therefore, at this point Arthur is right by offering only 41,000. If in the future this company will worth 2,000,000, it is Arthur’s effort and Nancy does not have right to get that money. If she wants that money, she should stay and run company with Arthur. It is a partnership. Finally, there are two ways of getting out from this impasse. First, Nancy should stay in partnership and run the company until it will worth 2,000,000. Second, they should go to court. Court will define worthy amount of money by comparing and investigating the pros and cons of this case.