Bee, Cee and Dee have been holding preliminary discussions with a view to forming a partnership to buy and sell antiques. The position has now been reached where the prospective partners have agreed the basic arrangements under which the partnership will operate.

Bee will contribute £40,000 as capital, and up to £10,000 as a long-term loan to the partnership, if needed. He has extensive other business interests and will not therefore be taking an active part in the running of the business. Cee is unable to bring in more than £2,000 as capital initially, but, because he has an expert knowledge of the antique trade, will act as the manager of the business on a full-time basis.

Dee is willing to contribute £10,000 as capital. He will also assist in running the business as the need arises. In particular, he is prepared to attend auctions anywhere within the United Kingdom in order to acquire trading inventory which he will transport back to the firms premises in his van. On occasions he may also help Cee to restore the articles prior to sale to the public.

At the meeting, the three prospective partners intend to decide upon the financial arrangements for sharing out the profits (or losses) made by the firm, and have approached you for advice. You are required to prepare a set of explanatory notes, under suitable headings, of the considerations which the prospective partners should take into account in arriving at their decisions at the next meeting.