Jack and Jill were living together. Jack wanted to start a small retail store, but did not have good credit. Jill, whose credit was excellent, signed loan agreements with Jack so he could borrow the money to start the business. Jack used business cards

Question

that stated he was the "owner" of the business. He and Jill filed separate tax returns. Jack stated he was self-employed and claimed the business was a sole proprietorship. The money that was earned from the store was placed into a joint checking account owned and used by Jack and Jill. When there were significant decisions to be made about the business, such as deciding to franchise the business, the decision was made jointly by Jack and Jill. Five years after the business was started, Jill left Jack. She claimed she was entitled to one-half the business's profits since she and Jack were partners. Jack disagreed and claimed they never had a partnership. Discuss Jill's claim.

Answer 1

Participants in an enterprise cannot be partners unless they share profits, but not all profit sharers are partners. The courts also consider the following factors in deciding whether there is a partnership:

a . Are the participants involved in the management of the business? Partners share in the management of the business, although not all managers are partners.
b. An agreement to share in losses is strong evidence of a partnership.
c. In a partnership, actions speak louder than words. If the people act like partners, then the law will treat them as such. If they do not act like partners, then nothing they say, orally or in writing, is enough, on its own, to create a partnership. Note, however, that in a close case, referring to themselves as partners may help sway a court, but it is not enough by itself to create a partnership.

Though it would be necessary to examine all the facts, it does appear that Jack and Jill had a partnership and that she is entitled to one-half the net profits of the business as of the date the partnership was dissolved. Of critical importance is that the money earned from the business was deposited into the couple's joint bank account and that Jill was actively involved in the management of the business.