Question

Two corporations both carry on a number of businesses both directly and through various subsidiaries. Each has a subsidiary, Speedy Truck Rental [not a real company] and We-Haul [not a real company] in the same line of business. The two corporate groups have determined that Speedy Truck Rental and We-Haul should be merged because there are competitive advantages in joining forces rather than carrying on independently. They want to merge by creating a partnership. To create the partnership, Speedy Truck and We-Haul would enter into a partnership agreement that identifies the assets and liabilities each will contribute and sets out the way profits and losses will be shared and how the partnership business will be governed. Because each of the corporate groups in our scenario would want to take part in the management of the partnership, a general partnership would probably be used.
Recall that the definition of a partnership has four distinct parts. Walk through the four different steps of the definition of a partnership, and determine whether the business relationship described in the case above would qualify as a partnership under the Uniform Partnership Act (UPA).

a. According to UPA Section 6, a partnership is _____________________________.
b. What does "association" mean in the definition of a partnership?
c. Do the individuals discussed in the case qualify as forming an "association?"
d. A partnership requires "two or more persons." Does the situation involved in the case involve "two or more persons?"
e. Does the situation in the case involve a business being carried on for profit?
f. What does it mean when we say the partners must be co-owners?
g. Does the situation described meet all four elements of the definition of a partnership? In other words, based on this information, could the two corporations form a partnership?

Answer 1

Answer:

a. According to UPA Section 6, a partnership is

“the association of two or more persons to carry on as co-owners a business for profit…whether or not the persons intend to form a partnership.”

b. "Association" means coming together to act as one.

c. Yes.  They qualify as forming an "association."

d. Yes. The situation involved in the case involves "two or more persons."

e. Yes.  The situation in the case involves a business being carried on for profit.

f. When we say the partners must be co-owners, it means that the "two or more persons" are joint owners.  Each partner owns a part of the entity.

g. The four elements of the definition of a partnership are met.  This implies that the two corporations could form a partnership under the UPA or the Revised UPA (RUPA).

Explanation:

The act clearly identified that a partnership must have two or more persons coming together to carry on the business for profit as co-owners.  The implication is that there are four elements that must be met for an entity to be declared a partnership.  They include: "association," "two or more persons," "carry on a business for profits," and "as co-owners."