Partnership

The relation subsisting between two or more persons who have contracted together to share as common owners the profits of a business carried on by all or any of them on behalf of all of them, Shumaker, Partnership, 2. Elements: The essential elements of a partnership are (1) a contract between the partners; a true partnership being always formed by contract, not by operation of law.

138 111. 74; 43 Mo. 391; 63 Pa. St. 273.

The socalled partnership by estoppel or holding out is only an apparent exception; it not being a true partnership inter s4, but only a liability of individuals to third persons as if they were partners. (2) A sharing of profits; but the profits must be shared between the partners as common owners C!as.

268; 5 Colo. 564; 30 Me. 384; 38 Cal. 206; 28 Ohio St. 319.

But community of ownership in the stock or capital by means of which profits are earned is not essential.

15 Conn. 67.

Test: Profit sharing, therefore, is not a test, nor is mutual agency, for mutual agency results from partnership, not partnership from agency. The true test is the intention of the parties to share in the profits as common owners. An agreement to share both profits and losses is prima fade but not conclusive evidence of intention to form a partnership (97 111. 303), as is an agreement to share profits with nothing said about losses (145 U. S. 611), or with a stipulation against the liability of one of the parties for losses (18 Fed. 888); but not an agreement to share gross returns (15 111. 31; 20 N. Y. 93), or to share losses or expenses only (92 111. 103; 132 Mass. 423). The common ownership of property does not create a partnership unless it be employed in business for common profit.

27 Iowa, 131.

Classification: Partnerships classified with reference to the nature of the association are either (1) ordinary partnerships, (2) limited partnerships, being those wherein the liability of one or more partners is, by compliance with certain statutory provisions, limited to the amount of their contribution to the capital stock, or (3) joint-stock companies, being partnerships with a capital stock divided into transferable shares. Partnerships classified with reference to their extent are either (1) universal partnerships, being those in which the parties bring into the firm all their property, of whatever nature, and employ all their services for the common benefit, (2) general partnerships, being those formed to transact some general class of business, or (3) special or particular partnerships, being those formed for a particular transaction. Partnerships classified with reference to their business are either (1) trading or commercial partnerships, being those whose business consists in buying or preparing for sale and selling commodities for profit, or (2) nontrading partnerships.