Partnerships: Formation

Question 1

Sources of Partnership Law

Answer 1

(1) UPA (1914) or RUPA (1997)

(2) Case law

Question 2

What is a Partnership (RUPA)

Answer 2

The association of two or more persons to carry on as co-owners of a business for profit…whether or not the persons intended to form a partnership

Question 3

RUPA Opt-Out provision

Answer 3

“An association formed under a statute other than the RUPA is not a partnership.”

Question 4

Is a partnership formed by sharing profits?

Answer 4

The sharing of GROSS returns does not by itself establish a partnership

A person who receives a share of the PROFITS is presumed to be a partner UNLESS profits are received in payment …
● of a debt
● for services as an independent contractor/wages to an employee;
● of rent;
● of retirement or health benefit to a beneficiary of a partner;
● of interest or other charge on loan

Question 5

Common Law Factors for Determining Whether a Partnership has been Formed

Answer 5

(1) Intention of parties
(2) Profit sharing
(3) Sharing of losses (risk)
(4) Management (control)
(5) Ownership of property (control)
(6) Rights of parties on termination/dissolution
(7) Conduct to third parties

Question 6

Partnership Formation Overview

Answer 6

1) RUPA § 202(a) Partnership Definition
2) RUPA § 202(b) Opt out Provision
3) RUPA § 202(c) Sharing of Gross or Net
4) Common Law Factors
5) Partnership by Estoppel

Question 7

Partnership by Estoppel

Answer 7

If a person purports to be a partner, or consents to being represented by another as a partner, the purported partner is liable to a person whom the representation is made, if that person enters into a transaction with the partnership.