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Two partners, Jones and Smith, owned and operated a successful dairy business together for 15 years
Two partners, Jones and Smith, owned and operated a successful dairy business together for 15 years. The business processed dairy products and operated a popular retail ice cream store. During the past year, the two partners have had an increasing number of serious arguments about how to operate the business and about planned future expansion of the business. Both partners have agreed that they no longer can operate the business together. Either partner is willing to sell his share of the business to someone else and to get out of the dairy business altogether. An independent appraiser has valued the total value of the business at $1.5 million. Partner Jones owns 49% of the business, and Partner Smith owns 51% of the business.
What is the value of each partner's share of the business?
What was the basis for your evaluation of the partners' share of the business?
Expert Solution
The partnership is a legal entity formed by two or more people and created by notarizing the partnership deed
Given information
- The total value business is $1,500,000
- There are two partners namely Jones and Smith,
- Jones ownership is 49%
Jones value in the business = total value business * Jones ownership
=$1,500,000 * 49%
=$735,000
- Smith ownership is 51%
Smith value in the business = total value business * Smith ownership
=$1,500,000 * 51%
=$765,000
The partnership type is assumed general partnership, where both the partners are responsible for day to day working and debts of the partnership
The ownership is based on pro-rata investment made at the beginning of the partnership formation and mentioned in the partnership deed
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