Three students in a business faculty created a computer program that compared various retirement plans. They decided to go into business together to offer their services directly to the public. After doing a feasibility study, they felt there were profits to be made. For tax reasons, they decided not to incorporate. Each contributed $15,000 and Wayne, one of the three, contributed a computer. In a short written agreement, they agreed that all three would be actively involved in the management of the business, that all three would work to update the program, that they would share the profits equally, and that they should not be viewed as partners. Based on these facts, which of the following statements is true?
A) They are not partners because they do not share profits in proportion to their capital contributions.
B) They would be considered partners despite their express intention to the contrary in their agreement.
C) They are not partners unless they realize a profit from their enterprise.
D) If one partner dies, the partnership would be dissolved even if they state otherwise in their agreement.
E) If Wayne were to go bankrupt, the partnership would be dissolved even if they state otherwise in their agreement.

Question

Quizplus · Accepted Answer

Despite their intention not to be viewed as partners, their actions (joint contribution to capital, active involvement in management, agreement to share profits equally) meet the criteria for a partnership under common law. The intention to not be partners, as stated in their agreement, does not override the legal reality of their business arrangement.

Three Students in a Business Faculty Created a Computer Program