Assignment 2- Case Study Report
The purpose of this report is to identify the business idea and discuss the business plan and lastly to identify the appropriate legal entity for our service business and the legal risk recognized to the available legal entities .The business idea chosen is an events planning business which is situated in Sandton and it will be planning events such as weddings, conferences, Christmas parties and reunions. Red velvet (name of the business) aims to be the best leading service entity in South Africa and it wants to be well known for the excellent quality that they give to their clients/customers. The partners decided to choose partnership as the legal entity because every partner is bringing her skills to the business and the partners have different professional backgrounds such as marketing and events planning. The assets and the profits are distributed evenly amongst the partners on the termination of the partnership. The legal risk attributed to the partnership is sequestration and litigation and the partnership cannot sue an individual partner for the debts of the business because partners are jointly and severely liable for the debts of the partnership and the partnership must sue and be sued in its own business name. There are no formal administrative requirements other than obtaining proper licenses and permits to form a partnership. Each partner contributes to the ongoing of the business and a partner can bind the partnership in any transaction if it falls inside the scope of the business.. The preference of a partnership over other legal entities has also been discussed in detail.. Each partners is entitled to represent the partnership but isn??™t entitled to compensation for all his contributions and they are co-owners in joint undivided shares.Partners owe fiduciary duty to each other. Also, each partner has the power to bind the partnership in any transaction according to mutual mandate, even if it falls outside the scope of the business.The enforce the rights of individual partners and those of the partnership action pro socio and action communi divundo may be instigated.Partners can enter into binding contracts with third parties as a principal. Their authority can be actual, ostensible or even by ratification.Partnerships are dissolved due to various reasons; by agreement, if it was formed for a specific purpose which has been accomplished, retirement, and addition of a new partner and by court order.A valid partnership agreement contract must be in place and registered for VAT to comply with Income Tax regulations, there must be an active bank account in the name of the partnership and the business must be registered with SARS and employee withholding tax (PAYE&SITE) which is electronically linked to CIPRO. It must also be registered to administer UIF and lastly, with the commissioner to facilitate COID act.