1109. Families and Partnerships

1109.1 May families form partnerships?

Yes. You may form valid partnerships with members of your family. For instance, a husband and wife or parents and children may conduct a business enterprise as a partnership.

1109.2 How is the validity of family partnerships determined?

The determination regarding partnerships with family members in a business depends on how you operate the business. You may have joint funds or mutual management with your spouse, but the legal incidents of the husband and wife relationship complicate the determination as to whether the business is jointly operated more than if the parties were unrelated. Merely "helping out" in the business or doing chores does not establish a partnership.

In cases involving closely related parties, the factors that usually indicate a partnership, such as the use of property, must be carefully evaluated to determine whether they indicate the existence of a partnership or a sole proprietorship.

Last Revised: March, 2001