Sean Bryan of Akin Gump examines the issue of when business arrangements cause two or more people to be treated as partners, either for state law or tax law purposes. His article begins as follows:
When entering into a business arrangement where revenues are shared between two or more persons, it is necessary to consider whether those parties have become partners either for state law or tax purposes. No express intent is required to form a general partnership or joint venture; the Delaware partnership statute defines a partnership as two persons who associate to carry on a business for profit, “whether or not the persons intend to form a partnership.” Parties do not have to file a certificate with a secretary of state or enter into a written agreement to form a partnership, and consequently neither is necessary for a court to find the existence of a partnership.
Certainly not all business arrangements where there is some sharing of revenue or profit are partnerships. Leases, loans and many other types of transactions often have economic terms providing for some level of sharing in profits. Such transactions, however, should include language expressly disclaiming the partnership relationship, because the consequences of being deemed a partner can be unexpected and significant. Partners have apparent authority in the eyes of third parties to bind each other to contracts, and each partner is individually liable for the obligations of the partnership arising from such contracts, intended or not.