Question

Tutoring concerns. wally and sally want to go into business together and plan on offering a tutoring service to high school and college students. wally proposes that they share control of the business and split profits equally and not bother with a written agreement. sally, however, is concerned about being able to pay their debts since they will have to rent tutoring space and purchase computers and supplies. she is also concerned about parents and students who may sue if the students' test scores do not improve. she tells wally that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. she tells wally that they should form a corporation to shield their personal assets. wally, however, says their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would likely result in double taxation. is wally correct that with his proposal that they share control of the business and split profits equally, there could be no personal liability for debts?

Answer 1

The type of business that Wally is proposing in the scenario above is partnership. There are three different type of partnership,they are: limited partnership, limited liability partnership and general partnership. Each of these three types provides partners with different level of liability. Thus, Wally was wrong when he said that there could be no personal liability for debts.