Article

Liability of a partner by name only

Professional service and other businesses are commonly run on a partnership basis. The following case addresses what can happen to someone called a partner even though effectively receiving a salary.
Under UK partnership law 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, and every partner in a firm is liable jointly with the
other partners for all debts and obligations of the firm incurred while he is a partner. X was asked to join a law firm and was stated on the notepaper and other communications to be a partner. It was
however agreed that he would be paid a fixed annual sum rather than share the profits or losses, and that he would not contribute any capital to the firm. In an action to recover a debt the creditor alleged that X was a partner and so was liable jointly with the other partners. X argued that he was not a
partner because he was not entitled to participate in the firm’s profits or losses. The Court of Appeal considered that X was a partner and the fact that he was paid a fixed sum rather than a share of the
profits did not preclude him from being deemed to be a partner.

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