Indications of Partnership Status. Carmen Allen and Sandy ...

[Garrulous]

Indications of Partnership Status. Carmen Allen and Sandy Newsome, in accordance with a written agreement dated March 11, 1987, conducted a carpet and wall-covering business under the name of Newsome Carpets and Wallcovering. The agreement provided that Allen would invest 5,000 cash in the business and that Newsome would invest carpet stock, fixtures, and equipment equal in value to 5,000. On November 4, 1987, Allen and Newsome executed a document entitled Partnership Agreement that established the name, place, nature, and duration of the business and outlined the operating procedures of the firm and the rights and responsibilities of the parties. The document referred to Newsome Carpets as a partnership and to Allen and Newsome as partners, each of whom received 50 percent ownership in the firm in return for her capital investment. The next day, on November 5, articles of incorporation designating Newsome and Allen as directors of Newsome Carpets, Inc, were filed in the office of the secretary of state. Evidence at trial indicated that Allen shared profits, rendered business advice, and signed documents as a general partner of Newsome Carpets. When the corporation was subsequently dissolved, one of the creditors, Orders Distributing Co, sued Allen and Newsome as partners to recover an outstanding debt. Allen (Newsome's whereabouts were unknown when the suit was brought) claimed that the business was a corporation, not a partnership, and that she therefore could not be held personally liable for the debt. Will the court hold that Newsome Carpets was a partnership and not a corporation? Discuss.

Question 2

Fiduciary duties apply to principals; agents have only non-fiduciary duties.
 a. True
  b. False
  Indicate whether the statement is true or false

[quynhmickitran]

Answer to Question 1

Indications of partnership status
The trial court found that Newsome Carpets was a partnership and not a corporation, and on Allen's appeal, the appellate court agreed. The appellate court stated that among other significant indicia of a partnership reflected in the record is the intent of the parties as indicated by the terms used and provisions of the Partnership Agreement.' Moreover, there is evidence that appellant shared profits, rendered business advice, resolved employee problems and signed documents as a general partner of Newsome Carpets. Our review of this record reveals ample evidence to support the trial judge's denial of appellant's motions and the jury's finding that a partnership existed between Newsome and the appellant.

Answer to Question 2

FALSE