Business Law - Divorce Settlement

1.

(a) Business partnerships are formed when two or more legal entities (whether individuals, corporations, trusts or partnerships) jointly decide to carry on the business together.  The 3 types of partnerships that can be formed are:

• General Partnership: This is a business arrangement where two or more legal entities is formed to share the profits and liabilities of the business. There is no formal process but may need to register with government agency. Both parties share the costs, participate in the management of the business, and ultimately expect to share the profits.
• Limited Partnership: This partnership arrangement consists of one or more general partners having unlimited liability and one or more limited partners having limited liability.
• Limited Liability Partnership: This partnership arrangement is usually formed between professionals when they enter in partnership for carrying the business together.

(b)  Unlimited liability: Unlimited liability refers to the business obligations that the partners maybe required to fulfill in case the business enterprise does not have sufficient assets to meet the liabilities. Generally, the partners in a partnership are liable to meet the obligations in their personal capacity both jointly and severally.

Liabilities under the 3 types of partnerships are as follows:

• General Partnership: The liability of each partner is unlimited for all the debts, obligations or any other liability which cannot be fulfilled by the business assets and each partner can be personally sued for any actions of the partnership. Each partner is vicariously liable for other partners and employees and each partner is an agent of the partnership and may bind it in contract.
• Limited Partnership: The general partners in this partnership have unlimited liability just like in General Partnership while the limited partners have their liability restricted to their investment in the partnership. The limited partner should not be actively involved in the running of the business in order to have their liability restricted.
• Limited Liability Partnership: In this partnership, each partner is only liable for any liability arising from his/her clients worked with and not for the work done by other partners. The partnership firm, however remains liable for the actions of all the partners in the partnership. Generally, Limited Liability Partnerships are allowed in high risk professional environments like lawyers, accountants, doctors, etc.

2. 

(a) Fiduciary duty is the highest standard of care to be exercised by the person having the duty (fiduciary) to the person whom the duty is owed (principal or beneficiary). The person discharging the duty (fiduciary) is required to discharge the duty in the best interests of the beneficiary. This means that the relationships such as directors in a corporation should entail trust and confidence and require that the persons involved should act honestly, in good faith and strictly in the best interests of the corporation. Directors owe this duty to corporation itself. Shareholders are members of the corporation but owe no duty to it. They are separate from corporation itself. Majority shareholder has ultimate control. Fiduciary duty also includes: