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NOTES FOR PARTNERSHIPS AND CORPORATIONS

1. GENERAL PARTNERSHIPS: IMPLIED

In the Lanz v. Lanz case, the plaintiff was trying to prove that he was a partner in his father’s trucking business. The court said that the plaintiff son would have to prove that there was a relationship between two or more parties carrying on a business together with a view to profit. The court said that there must be a contribution of capital, skill or other resources to a common project, joint management, purchase of partnership property and the right to share in net profits.

The plaintiff was able to prove that he drove the truck for the business but he made no other contribution. Although the accountant for the business described it as a partnership, the court will look at the substance of the relationship and not what it is called. The father made all the decisions, paid all of the bills and the taxes and had contributed capital to the partnership.

The court held that there was not enough evidence to establish a partnership.

If there had been a partnership the plaintiff would have been entitled to ½ of the profits. It is also important to know that partners are agents of each other and owe each other fiduciary duties.

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2. GENERAL PARTNERSHIPS: APPARENT

In Foothills Dental Labs v. Naik and Goldstein, Naik and Goldstein were practicing dentists in the same office premises and called themselves the Apple Dental Group. They had a written associate agreement which denied that they were partners. They did not share profits.

However, at an open house held at Apple Dental Group, Naik told a representative of Foothills that if Goldstein didn’t pay his lab bills then he, Naik, would. In fact Naik paid these bills on several occasions in order to earn airmiles on his credit card.

When Foothills was not paid for some of their services, it commenced an action against Naik and Goldstein for payment. Goldstein was, by then, bankrupt and Naik denied liability. Foothills was able to prove that Naik was an apparent partner with Goldstein under Section 16 of the Partnership Act because Naik had represented himself as a partner with Naik and the Foothills representative relied on the representation to extend credit to the firm. As a result of being an apparent partner, Naik was jointly liable for the debt incurred by Goldstein.

3. LIMITED LIABILITY PARTNERSHIPS

The limited liability partnership must be created expressly by filing documents and paying a fee. Its name must end in the words “limited liability partnership” or the abbreviation LLP. The LLP is a partnership however the partners are liable for debts only up to their capital contributions and are only liable for their own negligence up to their capital contributions (unless they are aware of the negligence of the