Formation of general partnership

Question 1

General partnership formation

Answer 1

1. general partnership only requires (1) two people, (2) acting as co-owners of a business, (3) for profit
   ii. ex. two people get together and start baking cakes for sale
2. subjective intent irrelevant: lack of intent or intent to not form a partnership is irrelevant
   i. the only intent that matters is whether they intended to carry on as co-owners of a business for profit
3. no formalities or filing is required
   i. writing: no writing is required, but SoF may require a writing if subject of partnership agreement or agreement itself falls within SoF
4. partnership agreement
   i. no agreement is required for a formation, and agreements cannot disavow formation
   ii. but partnership agreements can be used to contract around default statutory provisions governing partnerships

Question 2

Partnership by estoppel

Answer 2

1. if no partnership was formed in fact, parties may still be liable as if they were partners to protect reasonable reliance by third parties
2. i.e. if you let yourself be held out to the world as a partner, you can be liable as if you are a partner even though there is no partnership (no two parties acting as co-owners in a for profit business)

Question 3

Entity status

Answer 3

1. a valid partnership is a legal entity distinct from its partners

Question 4

General partnership types: at will and term

Answer 4

1. at will partnership:
   i. default form of partnership
   ii. partnership where the partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking
   iii. no definite term or no definite undertaking
   iv. a partnership formed to conduct a certain business is an at will partnership (“partnership to run a cake shop”)
2. term partnership:
   i. partnership where the partners have agreed, explicitly or implicitly, to remain partners for a definite term or until the completion of a particular undertaking
   ii. definite term or definite undertaking

Question 5

Individual partners

Answer 5

• factors for whether an individual is a partner:

1. sharing of profits
   i. a person who receives a share of profits is presumed to be a partner
   a. must be sharing profits not other income (not revenue etc.)
   i) sharing of gross returns (revenues) does not by itself trigger a presumption of partnership
   b. must receive profits as profit-sharing (not as salary, loan repayment etc.)
   i) receiving profits as a salary or debt payment is not a profit share (someone paid a salary is not presumed to be a partner)
2. right to participate in the control of the business
   i. control does not need to be actually exercised
3. individuals can rebut partnership status by showing a lack of right to control, or no sharing of profits or losses
   i. showing a lack of loss sharing is a rebuttal to partnership