Determining the Existence of a General Partnerships in Texas

General Partnerships in Texas are more common than people think. Individuals in the Dallas / Richardson area that form a business by oral agreement have unknowingly created a general partnership. General partnerships are common when two aspiring entrepreneurs orally decide to start a business and proceed without proper guidance from a lawyer.

The Court will look at five major factors to determine the existence of a general partnership. These factors are:

1. Did two or more people express an intent to be partners?
2. Did two or more people participate or have the right to participate in control of the existing business?
3. Did two or more people agree to share losses or liability for claims by third parties against the business?
4. Did two or more people agree to contribute money or other property to the business?
5. two or more people share profits of the business?

If the answer is yes to any of these factors there may be a basis for a general partnership. The Court will make the determination of a general partnership on a case by case basis but at least one of the abovementioned factors must be present for the Court to determine that a general partnership exists.

Certain factors will not be considered when a Judge decides to whether a general partnership exists or not. These factors are:

1. The right of two or more people to share profits as it pertains to:
   a. repayment of a debt;
   b. wages or compensation to an employee;
   c. payment of rent or interest on a car loan:
   d. payment of consideration for the sale of a business or other property:
2. The existence of joint or common tenancies; and
3. Sharing or possession of a right to share gross receipts.

If circumstances dictate that a general partnership is created between two individuals then certain fiduciary duties and obligations arise between the partners. All partners have a fiduciary duty loyalty and care to the partnership and each other. A breach of this fiduciary duty may give rise to actual, punitive damages, and lost profits.

If you believe that through certain actions you have created a general partnership with a third-party. Please contact Nacol Law Firm to aid you in creating a business entity that will safe-guard your assets and protect you from liability.

Julian Nacol, Attorney
Nacol Law Firm, PC
(972) 690-3333