Carmen Allen and Sandy Newsome, in accordance with a written agreement dated Mar
ID: 2561733 • Letter: C
Question
Carmen Allen and Sandy Newsome, in accordance with a written agreement dated March 11, 2007, conducted a carpet and wall-covering business under the name of Newsome Carpets and Wallcovering. The agreement provided that Allen would invest $10,000 cash in the business and that Newsome would invest carpet stock, fixtures, and equipment equal in value to $10,000. On November 4, 2007, Allen and Newsome executed a document entitled “Partnership Agreement” that established the name, place, nature, and duration of the business and outlined the operating procedures of the firm and the rights and responsibilities of the parties. The document referred to Newsome Carpets as a partnership and to Allen and Newsome as partners, each of whom received 50 percent ownership in the firm in return for her capital investment. Approximately one year later, articles of incorporation designating Newsome and Allen as directors of Newsome Carpets, Inc., were filed in the office of the secretary of state. The business stationery and advertising remained unchanged. Evidence at trial indicated that corporate tax returns were filed, and both individuals shared profits, rendered business advice, and remained actively involved. They frequently signed documents as a general partner of Newsome Carpets, but at times as an officer of Newsome Carpets. When the corporation was subsequently dissolved, one of the creditors, Orders Distributing Co., sued Allen and Newsome as partners to recover an outstanding debt. Allen (Newsome’s whereabouts were unknown when the suit was brought) asserted that the business was a corporation, not a partnership, and that she therefore could not be held personally liable for the debt. Is Carmen Allen personally liable for the debt? Discuss.
Explanation / Answer
In the instant case among the other significant indicators of a partnership reflected in the record is the intent of the parties as indicated by the terms used and provisions of the partnership agreement. Moreover there is evidence that both Allen and Newsome shared profits, rendered business advise and signed documents as general partners
In an unlimited partnership every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.
Hence having regard to above provisions Carmen Ally can be held personally liable for the debt