Single Entity and Partnerships: Partnership Act rules
Section 2 of the Partnership Act 1890 provides that regard must be had to the following rules when determining whether or not a partnership exists:
(i) joint tenancy, tenancy in common, joint property, common property, or part ownership does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof;
(ii) the sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived; and
(iii) the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business but the receipt of such a share, or of a payment contingent on or varying with the profits of a business, does not of itself make him a partner in the business.
These rules establish the evidential weight to be attached where the particular facts of a case precisely duplicate them. But you still need to think about the true contract and the intention of the parties as illustrated by the whole facts of the particular case.
There are other factors which may mitigate against the existence of a partnership, for example, where the alleged partners
- contribute no capital, or
- do not share any losses that are generated.
Also, the stated intention of the parties is not conclusive if, in point of law, the relationship is a partnership.