Partnership formation and liability: which statement is true?

• A. Written agreement is required regardless of duration.
• B. No formalities; partnership exists if two or more share profits; participation in profits is prima facie evidence; liability: all partners jointly and severally liable for partnership debts.
• C. Partnerships must file annual reports with the state.
• D. Partners have no liability to creditors.

Answer: (B)

Under partnership law, a general partnership forms simply when two or more people agree to carry on a business for profit. No written contract or filing with the state is required for the partnership to exist. If two or more people share profits from the business, that sharing is strong evidence of a partnership (profits are prima facie proof of partnership), though other factors like control and business structure may also be considered.

Liability for partners is broad: each partner is personally liable for the debts and obligations of the partnership, and that liability is joint and several. This means a creditor can sue one partner for the full amount due, and that partner can seek contribution from the other partners. There is no obligation for the partnership to file annual reports for a basic general partnership, and saying that partners have no liability to creditors is incorrect.

So the true statement reflects that a partnership can form without formalities, profits sharing signals the partnership, and partners bear joint and several liability for partnership debts.