1. Creation of General Partnerships Flashcards
What is a general partnership?
an association of two or more persons to carry on as co-owners a business for profit.
What is the partnership based on?
a partnership is based on an agreement between the partners; there are no particular formalities or statutory requirements for formation.
Can a partnership contract be oral?
Yes. A partnership contract may be oral and may be inferred from the conduct of the parties.
NO WRITTEN AGREEMENT IS REQUIRED.
The key test of whether a partnership has been formed is:
the intent of the parties to enter into a relationship, no matter what it is called.
The sharing of profits is generally treated as prima facie evidence:
at a partnership exists; in other words, a person who receives a share of the profits of a business is presumed to be a partner in the business.
When is there no inference of sharing of profits?
- a debt, by installments or otherwise;
- wages, salary, or other compensation to an employee or independent contractor;
- rent to a landlord;
- an annuity or other payment to a surviving spouse or representative of a deceased partner;
- interest or other payment or charge on a loan; or
- consideration for the sale of the goodwill of a business or other property by installments or otherwise.
Can a person be held liable when they misled a creditor of a partnership even when it doesnt exist?
Yes. Even if a voluntary partnership does not exist, liability may be imposed on one who has let it appear that he is in a partnership if a creditor is thereby mislead.
