Profits and Loss

Question 1

Distributions

Answer 1

• when money is paid out of the partnership to constituent partners
• default rule= partners do not have the right to demand a distribution
• can be changed by the agreement

Question 2

Division of Profits and Losses

Answer 2

• dictated by partnership agreements
• not required to correspond with contributions
• if no agreement or it doesn’t address profits and losses, follow the default rule (profits are divided equally and losses follow profits)

Question 3

Bonus-

Answer 3

• partners are not entitled to any compensation for services rendered to the partnership, unless the partnership agreement states otherwise
• It is irrelevant that one partner may be forced to assume more work than anticipated, while other partners do nothing to further the business of the partnership.
• It is possible to imply an agreement to compensate a partner for extraordinary services when all partners do not have equal interests, are not equally liable, and are not equally responsible for the conduct of the partnership business.