Kathy Lentz, Rob Snyder, and Tom Rohm were all general partners in a consulting business. Each partner owned one-third of the business. The partnership agreement stated that all three partners must approve vouchers for payments in amounts exceeding $5,000. While Tom was on vacation, Kathy and Rob decided to purchase a new computer system costing $6,800. A voucher was prepared and Rob signed both his and Tom’s name. Kathy signed her name and gave the voucher to the accounts payable clerk who wrote the check for $6,800.

1. Why would a partnership agreement specify that all purchases over a certain amount be approved by all partners? Are there any circumstances that would warrant deviation from this policy?

2. What are the disadvantages of the partnership form of business ownership?

3. Write a short memo from Tom Rohm to Kathy Lentz and Rob Snyder expressing disapproval of the situation.

4. In groups of three or four, discuss some of the possible outcomes of this situation.