MBE Rules · Business Associations
General Partnership Formation
Cal. Corp. Code § 16202
The rule
A general partnership is the association of two or more persons to carry on as co-owners a business for profit. No writing or formal filing is required. Whether a relationship is a partnership is determined by facts including sharing of profits, control, contribution of capital, and the parties' intent.
In plain English
A general partnership is created when two or more people come together to run a business with the intention of making a profit. There are no formal requirements like a written agreement or filing, and the existence of a partnership is based on various factors such as profit sharing, control over the business, capital contributions, and the intent of the parties involved.
Worked example
Alice and Bob start a coffee shop together, sharing profits equally and making joint decisions about the business. They never signed a formal agreement but both contribute money and time to the venture. Since they operate with the intent to make a profit and share control and profits, they have formed a general partnership.
Memory hook
No papers, just profits: partnerships form through action and intent.
The trap
Exams may present scenarios where parties have a loose arrangement but do not intend to form a partnership, leading students to mistakenly classify it as one. Pay attention to the intent and actions of the parties.
How examiners test it
Questions often involve fact patterns that test the nuances of partnership formation, including the presence or absence of formal agreements and the intent of the parties. Look for indicators of profit-sharing and control.
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