Vaughn starts Wind Systems to make and sell turbines. Later, Vaughn contracts with Xi to invest additional capital in the firm in exchange for 25 percent of the profits. Vaughn and Xi are not partners in Wind Systems because
A)they do not share the profits equally.
B)their agreement does not provide for the sharing of losses.
C)Vaughn started the firm before Xi agreed to invest additional capital.
D)they do not have joint control over the business.

Question

Quizplus · Accepted Answer

The key factor that determines a partnership is joint control or management of the business, not necessarily how profits are shared, how losses are dealt with, or the sequence in which partners join the business. Since Xi's investment for a share of the profits does not include joint control over Wind Systems, they are not considered partners.

Vaughn Starts Wind Systems to Make and Sell Turbines