In Kealy v. Russell, the Federal District Court for the District of Nevada provided a reminder that intentional acts like filing a certificate of partnership are not required for creation of a partnership. There, plaintiff alleged that he and defendant had carried on a partnership that operated car dealerships for several years. Plaintiff managed the dealerships, while defendant handled financials and was responsible for partnership debts. Plaintiff received 25% of the profits and a salary, and defendant received 75% of the profits.
After the relationship soured and plaintiff filed suit, defendant claimed there could be no partnership because the parties had never filed a certificate to form a limited partnership. While the court acknowledged the statutory requirement, it held that “the certificate is for the protection of third parties doing business with the entity. Accordingly, it does not affect the rights of the partners amongst themselves.” 2020 WL 2559934, at *2 (D. Nev. 2020) (citation omitted).
The defendant contended that the court’s authority for that proposition, Rond v. Yeaman-Yordan-Hale Prods., 681 P.2d 1240, 1242 (Utah 1984), was no longer good law because the Utah partnership statute under which it was decided only required “substantial compliance” rather than mandating the filing of a partnership certificate, the current requirement. The court disagreed, finding that the amendment did not change Rond’s reasoning, and that other jurisdictions also hold that certificate requirements are intended to benefit third parties doing business with partnerships, not to benefit the partners themselves.
Indeed, the Utah Uniform Partnership Act, like many others, provides that “the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.” Utah Code 48-1d-202(1). A requirement that a certificate of partnership -- an intentional act -- be filed before a partnership could exist would contradict this statutory definition requiring no intent. This case is another reminder that partnerships can be formed without acts expressly intended to create a partnership.