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Partnerships


  • A Partnership is an association of two or more persons to carry on a business as co-owners for profit

    • The phrase “carry on a business” includes almost every trade, occupation, or profession

      • It does not include passive co-ownership of property (e.g. joint tenants of a piece of land)
      • Partnerships do not include non-profit unincorporated associations (e.g. labor unions, charitable organizations, clubs)

    • Co-ownership of the “business” (and not merely of assets used ina business) is an important element in determining whether a partnership exists.

      • The most important element of co-ownership is profit sharing
        • Need not be equal, but is treated equally unless specifically stated
        • Receipt of a share of profits is prima facie evidence(raises a presumption) of a partnership

      • Another important element of co-ownership is joint control
        • Each partner has an equal right to participate in management. Right to manage may be contracted away to a managing partner

      • Under Revised Uniform partnership Act, now adopted by majority of states, partner is no longer co-owner of partnership property

  • Partnership relationship creates a fiduciary relationship between partners. This relationship arises because each partner is an agent for partnership and for each other in partnership business.

  • Partnership relationship is based on contract but arrangements may be quite informal. Agreement can be inferred from conduct (e.g. allowing someone to share in management and profits may result in partnership even though actual intent to become partner is missing)

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