GP (Roger and Victoria)

Question 1

Problem 2.1. On June 10, 1992 Roger began a business baking and selling cupcakes. On April 20, 1994 Virginia loaned Roger $50,000 for use in operating the business. Virginia and Roger did not establish a repayment schedule. Instead, Roger periodically repaid Virginia from the profits of the business. Virginia also periodically advised Roger about how best to market and sell the cupcakes.

What is Virginia Contributing to the Business?

Answer 1

A Loan of $50,000 to Roger for Use in Operating the Business. (Money)

Question 2

Problem 2.1. On June 10, 1992 Roger began a business baking and selling cupcakes. On April 20, 1994 Virginia loaned Roger $50,000 for use in operating the business. Virginia and Roger did not establish a repayment schedule. Instead, Roger periodically repaid Virginia from the profits of the business. Virginia also periodically advised Roger about how best to market and sell the cupcakes.

Is the Loan a to the Business Evidence of a Partnership?

Answer 2

Probably Not, Partners usually share profits, and profit sharing is prima facie evidence that a partnership exists unless profits are received as debt service, wages, rent or an annuity contribution.

The Loan is Probably a Debt Service