Opinion ID: 2834521
Heading Depth: 4
Heading Rank: 5

Heading: contributing or agreeing to contribute money or property to the business.6

Text: Id. art. 6132b-2.03(a). The common law required proof of all five factors to establish the existence of a partnership. See Coastal Plains , 572 S.W.2d at 287 . However, TRPA contemplates a less formalistic and more practical approach to recognizing the formation of a partnership. First, TRPA does not require direct proof of the parties’ intent to form a partnership. Tex. Rev. Civ. Stat. art. 6132b-2.02 (stating that two or more persons may form a partnership regardless of “whether the persons intend to create a partnership”). Formerly, the intent to be partners was a “prime,” although not controlling, element in the creation of a partnership. Coastal Plains , 572 S.W.2d at 287 . Instead, TRPA lists the “expression of intent” to form a partnership as a factor to consider. Tex. Rev. Civ. Stat. art. 6132b-2.03(a )( 2). Second, unlike the common law, TRPA does not require proof of all of the listed factors in order for a partnership to exist. Third, sharing of profits—deemed essential for establishing a partnership under the common law—is treated differently under TRPA because sharing of profits is not required. Cf. Friedlander , 14 S.W. at 787 (“A common interest in the profits is an essential element to constitute a partnership.”). Still, TRPA comments note that the traditional import of sharing profits as well as control over the business will probably continue to be the most important factors. Tex. Rev. Civ. Stat. art. 6132b-2.03 Comment of Bar Committee. Additionally, TRPA recognizes that sharing of losses may be indicative of a partnership arrangement but states that such an arrangement is “not necessary to create a partnership.” Id . art. 6132b-2.03(c). TRPA also restates and extends the list of circumstances in TUPA that do not by themselves indicate that a person is a partner. 7 Id. art . 6132b-2.03(b). The question of how many of the TRPA factors are required to form a partnership is a matter of first impression for this Court. The TRPA factors seem to serve as a proxy for the common law requirement of intent to form a partnership by identifying conduct that logically suggests a collaboration of a business’s purpose and resources to make a profit as partners. After examining the statutory language and considering that TRPA abrogated the common law’s requirement of proof of all five factors, we determine that the issue of whether a partnership exists should be decided considering all of the evidence bearing on the TRPA partnership factors. While proof of all five common law factors was a prerequisite to partnership formation under the common law, the totality-of-the-circumstances test was, in some respect, foreshadowed in Texas case law. As Justice Jack Pope wrote for the San Antonio Court of Appeals, No single fact may be stated as a complete and final test of partnership. Each case must rest on its own particular facts and the presence or absence of the usual attributes of a partnership relation. The earlier Texas rule indicated that profit sharing was the controlling test. We think it is now generally held that such a test is not all-inclusive and controlling . . . . The absence of an express provision obligating the parties to share in the losses is also important and indicates that no partnership existed. But this feature too is not controlling. Davis v. Gilmore , 244 S.W.2d 671, 673–74 (Tex. Civ . App—San Antonio 1951, writ ref’d ) (citations omitted). Many states apply this totality-of-the-circumstances test.8 We note the difficulty of uniformly applying a totality-of-the-circumstances test, see Perry Homes v. Cull , 258 S.W.3d 580, 592 (Tex. 2008) (explaining the difficulty of applying a totality-of-the-circumstances test in determining whether a party waived an arbitration clause in a contract), but we cannot ignore the Legislature’s decision to codify the essential common law partnership factors in TRPA without specifying that proof of all or some of the factors is required to establish a partnership. See Tex. Rev. Civ. Stat. art. 6132b-2.03; In re M.N. , 262 S.W.3d 799, 802 (Tex. 2008) (explaining that courts presume that the Legislature included each word in the statute for a purpose and that words not included were purposefully omitted). Yet, we can provide additional guidelines for this analysis. Of course, an absence of any evidence of the factors will preclude the recognition of a partnership under Texas law. Cf. Schlumberger Tech. Corp. v. Swanson , 959 S.W.2d 171, 176 (Tex. 1997) (applying TUPA). Even conclusive evidence of only one factor normally will be insufficient to establish the existence of a partnership.9 To hold otherwise would create a probability that some business owners would be legally required to share profits with individuals or be held liable for the actions of individuals who were neither treated as nor intended to be partners. See Tex. Rev. Civ. Stat. art. 6132b-3.03(a) (explaining that a partnership is liable for the acts of a partner done with authority or in the ordinary course of the partnership’s business); see also Kao Holdings, L.P. v. Young , 261 S.W.3d 60, 63 (Tex. 2008). The Legislature does not indicate that it intended to spring surprise or accidental partnerships on independent business persons, if, for example, an employee is paid out of business profits with no other indicia of a de facto partnership under TRPA. On the other end of the spectrum, conclusive evidence of all of the TRPA factors will establish the existence of a partnership as a matter of law. The challenge of the totality-of-the-circumstances test will be its application between these two points on the continuum.