What Is a “Partnership”, Was One Formed and How Is It Dissolved?
Partnership and Business Issues
Do you have issues with your business partners? Do you know if you really have a legal partnership? The Irvine partnership lawyers of Brown & Charbonneau, LLP can help. We have extensive experience in dealing with all aspects of partnership law and related disputes.
What is a Partnership?
A partnership is “an association of two or more persons to carry on as co-owners a business for profit.” California Corporations Code § 16101(9).
The legal definition is as follows:
(9) “Partnership” means an association of two or more persons to carry on as co-owners a business for profit formed under Section16202, predecessor law, or comparable law of another jurisdiction,and includes, for all purposes of the laws of this state, a registered limited liability partnership, and excludes any partnership formed under Chapter 2 (commencing with Section 15501),Chapter 3 (commencing with Section 15611), or Chapter 5.5 (commencing with Section 15900).
(10) “Partnership agreement” means the agreement, whether written,oral, or implied, among the partners concerning the partnership, including amendments to the partnership agreement.
Was a Partnership formed?
In determining whether a partnership exists, the burden of proof rests with the party alleging the fact. Toney v. Nolder (1985) 173 Cal.App.3d 791, 796. When no written agreement exists, proof of the partnership must be by a preponderance of the evidence. Weiner v. Fleischman (1991) 54 Cal.3d 476, 490.
While there is no specific test to use in analyzing whether a partnership was formed, certain factors are frequently taken into consideration. One such factor is the objective intent to form a partnership. The existence of a partnership depends on the intent of the parties, which can be shown not only by the agreement itself, but by the actions and conduct of the parties. Lusher v. Silver, (1945) 70 Cal.App.2d 586, 588. The “crucial factor of intent” is revealed by the terms of the agreement, conduct, and surrounding circumstances. Cochran v. Board of Supervisors (1978) 85 Cal.App.3d 75, 80.
Was there a “meeting of the minds”?
Another way of analyzing whether a partnership exists is to ask: was there a “meeting of the minds?”. If there is no “meeting of the minds”, there is no partnership. In looking at basic contract law, the parties’ “outward manifestations must show that the parties all agreed ‘upon the same thing in the same sense.’ ” Weddington Prod., Inc. v. Flick (1998) 60 Cal.App.4 th 793, 811 (citing California Civil Code § 1580).
If there is a Partnership, how is it dissolved?
A partnership at will is dissolved by the express will of at least half of the partners. California Corporations Code § 16801(1). In a partnership at will, a partner “is not bound to remain in a partnership, regardless of whether the business is profitable or unprofitable.” Page v. Page, (1961) 55 Cal.2d 192. If there is actual knowledge of dissolution, the partnership will be deemed dissolved under California Corporations Code section 16102(a), which states: “A person knows a fact if the person has actual knowledge of it.”
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