Partnerships and Joint Ventures

A ``partnership'' is an association of two or more persons to carry on a business, as owners, for profit, regardless of whether the persons intend to create a partnership or whether the association is called a ``partnership,'' ``joint venture,'' or other name. A partnership may be created only under the Texas partnership statutes or under similar statutes of other jurisdictions. An association or entity created under another set of statutes is not a partnership.

Until January 1, 1999, the expired Texas Uniform Partnership Act (TUPA), for partnerships formed before January 1, 1994, recognized a non-partnership entity called an ``association.'' An entity was an association if (1) the word ``associates'' or ``association'' was part of and consistently used in the entity's name; (2) the entity's assumed name certificate contained a statement to the effect that the association intended not to be governed by TUPA; and (3) the business the entity transacted was wholly or partly activity in which corporations may not engage

The term ``partnership,'' applied broadly, encompasses the general partnership, first recognized at common law, and the limited partnership, a creation of statute. This chapter focuses on partner liability for general partnerships. A special subcategory of both types of partnerships, know as ``registered limited liability partnerships,'' or ``LLPs,'' was created by statutes enacted in 1991. The registered limited liability partnership is not a separate category of entity, but rather a type of general partnership. A registered limited liability partnership may be created from either a general or limited partnership. Registration as a limited liability partnership does not change a general partnership into a limited partnership or vice versa. Registration of a partnership as a limited liability partnership simply protects individual partners from tort liability for certain acts or omissions of other partners.

Any person may be a partner, provided that the person does not otherwise lack legal capacity. The term ``person'' includes individuals, corporations, business trusts, estates, trusts, custodians, trustees, executors, administrators, nominees, other partnerships, associations, limited liability companies, governments, governmental subdivisions, agencies or instrumentalities, and any other legal or commercial entities in their own or in their representative capacities

There are statutory rules and factors for determining whether an entity will be treated as a partnership. The first and most important rule is that the existence of a partnership is measured by the conduct of the purported partners among or between themselves. In other words, a person who does not qualify as a partner in a partnership may not be treated by a third person as if he or she actually were a partner. If a third person has been misled by false representations of a partnership, or by false representations as to some particular person's status as a member of an established partnership, these representations to third parties do not create an actual partnership or make the person an actual partner. The liability, if any, for losses created by such representations is determined by general principles of law, such as fraud, estoppel, and so forth. Partnership law, per se, does not measure this liability.