Companies and partnership

Alice, Khalid, and Stephen are architects in a partnership they set up several years ago. They do not have a formal written agreement to govern the business. They design off or promises and supply stationary, including paper, pee, pencils, to their corporate clients. The stock is kept in a warehouse which is owned by Alice but which she has allowed the firm to use for several years, again without any formal agreement. Allon is 60 and hoping to retire soon and would like her daughter Sally to take over her place in the butiness. Khalid and Stephen are both in their 40s and have young families. The firm has a substantial loan which the three partners arranged with a bank when they pet up the business; they are personally responsible for the loan and gave security for it over their houses. To expand the buniness, they are looking to take out a loan from another bank. Recently Khalid read in the trade newspaper that now laws will soon be introduced to make architects legally liable for structural faults in the buildings which they design; he is worried that, If they make a mistake In the future, they will become bankrupt because they will be personally lable to clients for whom they designed faulty buildings. Advise the partners on the advantages and disadvantages of the way in which they are presently conducting the business, and whether they should convert it to a company. Your advice should be related to the facts of their personal circumstances, the potential future risks to the business, and the intention to raise a loan in the future (and the security they may offer to a bank which provides it]. Total: 100 marky