This section discusses the aspects of the law that specifically apply to general partnerships.

It may be stated that those persons are partners who join together to carry on an enterprise for their common benefit and who own and share the profits thereof in certain proportions. The word implies and requires a union or association of two or more persons, by agreement and intention, for a common legal objective, business, or enterprise with community in use of money, property, facilities, or service, contemplating the sharing of profits and losses. A "person" is, in general usage, a human being (i.e. natural person), though by statute term may include labor organizations, partnerships, associations, corporations, legal representatives, trustees, trustees in bankruptcy, or receivers. The test of the existence of the partnership relationship is a common enterprise and a community of interest therein, the prosecution of the same for the joint profit of the parties, and a right in each of them to share in the profits thereof as such.

A partnership is created by and through an agreement. It follows that any person who becomes a partner under the agreement must have been a party to the agreement. The agreement may be in writing or it may be oral. Normally, a partnership between individuals comes into existence as of the date the agreement is made. However, the agreement itself may evidence a desire by the parties to the agreement that the partnership be created as of a different date. In the absence of language specifying a different date, it may be presumed that the partnership is created as of the date the agreement is executed. However, a preexisting partnership agreement may be reduced to writing today to describe the relationship existing during a prior period. The examination of a written partnership agreement will usually reveal the date the partnership was formed. When there is no written agreement, however, more difficulties will be faced in finding the date a partnership was created. Evidence to support a finding in this situation may come from various sources.

Since a partnership has its existence solely out of the agreement and in accordance with an agreement, the terms of the agreement itself should determine the intent of the parties as to when they desire to become partners. The agreement either may be executed as of the present to create some arrangement between the parties as of the present or the agreement may be written in such language as to evidence an intent between the parties that a partnership will not be created until a future date. This future date may be fixed as a definite date or it may be fixed as a future date to be determined by the occurrence of a certain definite circumstance. That is, the partnership by its terms may be contingent upon the occurrence of any one or more circumstances which the parties agree upon.

This section applies only to partnerships created prior to January 1, 1994 and have not elected to be covered under the Texas Revised Partnership Act.

The death of a partner usually dissolves a partnership. This is the general rule stated in Chapter 1 - Dissolution. An exception to the rule is the case of a "continuing partnership" discussed in Chapter 1- Continuing Partnership.

If a business continues to operate following the death of a partner, the successor employing unit may be:

The surviving partners are trustees of the assets of the partnership. They have the responsibility of protecting the ownership interest of the estate of the deceased partner and have one year in which to liquidate the assets and terminate the partnership's business. They may be given court permission to complete contracts in effect at the time of the partner's death. The estate or heirs of the deceased partner have an ownership interest in the profits from contracts completed after the partner's death; but do not have, as a matter of law, any right to participate in management of the business. Therefore, if investigation discloses that surviving partners are operating the business to complete contracts in progress at time of death, and otherwise doing things to liquidate the partnership, for the purpose of determining the amount of settlement with deceased partner's estate, the Commission will recognize a continuation of the original partnership until such time as the settlement with heirs is made. After the settlement with the heirs, a continuation of the business by the surviving partners will be recognized as a new employing unit.

The surviving partners sometimes enter into a partnership agreement with the deceased partner's heirs or with the legal representative of his estate, for continuation of the business. This may occur immediately after death or at some later date. The Commission will recognize that such an agreement creates a new partnership.

If a single person, who is a member of a partnership, marries, he/she remains personally liable for the partnership's debts. Likewise, his/her capital in the business is subject to levy for the payment of partnership debts. Though their spouse would be joined as a matter of form in a suit against the individual for collection of taxes owed by the partnership, the spouse is not personally liable for the partnership's debts which were incurred prior to their marriage.

Presuming that the terms of the original partnership agreement are known and have described the capital investment, profit-sharing ratio, managerial responsibilities and other factors evidencing the understanding of the parties to the agreement, a later alteration might not create a new employing unit. This alteration in the original agreement might effect a different profit-sharing ratio, a different capital investment ratio, an expansion of the business to create a new establishment in the same or a different line of business, changed managerial responsibilities, etc. The question of whether a new employing unit is created cannot be answered in this treatment of the subject; but the administrative determination as to whether a new employing unit has been created will depend upon statements received from the partners as to their intentions at the time of the original agreement and a statement that the later alterations were as anticipated at the time of the original agreement.

The same individual partners may have associated themselves together to operate more than one business, or they may have begun the operation of another business establishment at some time later. Often it becomes important to determine whether the individuals compose one partnership in the operation of one of the places of business and the same individuals compose another separate and distinct partnership in the operation of the other business. As a matter of law, there can be either one employing unit or two employing units.

Even though a written partnership agreement can be produced for evaluation, the agreement itself may be subject to different interpretations because of the indefiniteness or ambiguity of language used in it. More often the investigation will concern itself with the relationship between the individuals when a written partnership agreement cannot be produced in evidence. When there appears to be any real and material question of the existence of a partnership relationship under the facts represented by the ostensible partners, a request should be made that the facts be reduced to writing and signed by the questionable partners. This is particularly important in a situation where the alleged partner might be an employee rather than a partner. Stated another way, close examination should be made of a questionable relationship when the alleged partner would otherwise be in employment.

Partnerships are created out of an agreement by the language of the agreement and by the manner in which the parties conduct themselves as a result of the agreement. From the agreement, or from the agreement and the conduct of the parties, evidence is found to show the relationship which the parties intended. The intent of the parties is one of the leading tests for a partnership relation. Courts have said that effect should be given to the intention of the parties, if possible; yet they may intend no partnership and yet, in fact, have formed one. This means that the intention of the parties should be given consideration but that such an intention is not the sole test. Persons may be partners without any definite or expressed intent or without expression in the agreement describing the nature of the relation between them. As the agreement becomes less definite in describing the nature of the relationship, more consideration will be given to the manner in which the parties have conducted themselves.

As defined, "partnership" implies a community of interest in the property, business or enterprise. At the time the partnership is formed, there may or may not be a community of interest in the physical properties of the business, since the community of interest in the business or enterprise may have been created by a contribution of money or physical property by one party and a contribution of skill, service, or a valued name by the other party. In making an investigation, it should be remembered that a partnership may be created by any kind of a contribution to the business which gives one party a common interest with the other parties in the business or enterprise.

The receipt of a share of the profits of a business is prima facie evidence that the recipient is a partner in the business except that no such inference can be drawn if the profits were received in payment of:

Although a person's compensation is measured by the amount of profits or losses in the business, that person is not a partner unless there are other facts pointing to a partnership relationship.

The records maintained for the business, public records and records of dealings by the business with other individuals can furnish evidence bearing on whether or not a partnership exists by showing either the intent of the parties and/or the manner in which they have conducted themselves. Listed below are the types of records which might be reviewed in an investigation of this nature:

Chapter 1 - Definition and Chapter 1 - Records state the general rules with respect to partnerships as employing units. It is particularly pertinent to this discussion that a partnership is involuntarily dissolved upon the withdrawal, death, addition, insanity or bankruptcy of one of the partners (see Chapter 1 - Definition). Employers have often contended that theirs is a "continuing partnership," i.e., one which can and does continue after the death of one of the partners. The Commission has usually denied such a possibility and has ruled that a new employing unit results after the death of a partner. The Commission will continue to rule that a partnership created prior to January 1, 1994 that has not elected to be covered under the Texas Revised Partnership Act cannot be continued in that circumstance, with one exception: There can be a "continuing partnership" in certain, unusual and comparatively, rare cases.

A study of Texas case law reveals that there is a line of court decisions holding that a partnership can continue after the death of a partner if one of these two situations exists:

Experience shows that there are not many "continuing partnerships" which meet the very strict conditions stipulated in these cases.

Field representatives should not categorically inform an employer that a "continuing partnership" is impossible. When an employer makes such a contention, the facts should be submitted to the State Office Status Section for a ruling. Copies of wills and other pertinent documents and evidence of agreement should be obtained and submitted.

The Texas Legislature passed the Uniform Partnership Act (Art. 6132b, V.A.C.S.) pertaining to general partnerships effective January 1, 1962. The provisions of this Act must be taken into consideration in examining any change in composition of a partnership which occurs on or after January 1, 1962.

Section 31 of the Act provides: "Dissolution is caused:

It appears clear that a "continuing partnership" can be recognized (i.e., change in identity of employing unit does not occur) in the situation where a partner dies or withdraws or a new partner is added if the partnership agreement provides for continuation after such an event. This is true whether or not the expiring partner's will provided for continuation.

A change in composition of a general partnership will affect the entity according to the following:

Based upon the previous Texas Uniform Partnership Act, the Commission has considered a partnership to be comprised of its partners and any change in composition would necessitate the forming of a new legal entity. Under previous rules, withdrawal or addition of a partner created a new partnership. This creation of a new entity required that a new TWC Account Number be established. Under the Texas Revised Partnership Act (TRPA), effective January 1, 1994, a partnership continues until terminated. Partnerships formed before January 1, 1994 can elect to be covered by the Act. Effective January 1, 1998 they are automatically covered by the Act.