Colorado § 7-60-107 - Partnership determined - how.

§ 7-60-107. Partnership determined - how.

(1) In determining whether a partnership exists these rules shall apply:

(a) Except as provided by section 7-60-116, persons who are not partners as to each other are not partners as to third persons;

(b) Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not of itself establish a partnership, whether such co-owners do or do not share any profits made by the use of the property;

(c) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived;

(d) The receipt by a person of a share of the profits of a business is prima facie evidence that the person is a partner in the business, but no such inference shall be drawn if such profits were received in payment:

(I) As a debt by installments or otherwise;

(II) As wages of an employee or rent to a landlord;

(III) As an annuity to a surviving spouse or representative of a deceased partner;

(IV) As interest on a loan, though the amount of payment varies with the profits of the business;

(V) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.

Source: L. 31: p. 647, § 7. CSA: C. 123, § 7. CRS 53: § 104-1-7. C.R.S. 1963: § 104-1-7. L. 77: (1)(d)(III) amended, p. 294, § 1, effective July 1. L. 2004: IP(1)(d) amended, p. 1422, § 70, effective July 1.

ANNOTATION

A partnership can only be created by a contract of the parties whereby they agree to place their money, effects, labor, and skill in a lawful business and to divide the profits and bear the loss in certain proportions. Mann v. Friden, 132 Colo. 273, 287 P.2d 961 (1955).

Mere joint ownership of land does not establish a partnership even though profits are shared. Brown v. Miller, 111 Colo. 327, 141 P.2d 682 (1943).

Subsection (1)(d) makes receipt of a share of the profits of a business prima facie evidence that the person receiving it is a partner. Quier v. Rickly, 166 Colo. 5, 177 P.2d 549 (1947); Montgomery v. Tufford, 165 Colo. 18, 437 P.2d 36 (1968).

And where there is no evidence indicating that the landlord-tenant relationship exists between individuals, the mere fact that profits come from rental property does not bring them within the exception of subsection (1)(d)(II) as "rent to a landlord". Montgomery v. Tufford, 165 Colo. 18, 437 P.2d 36 (1968).

Assignment of right to profits. Where a partner assigns his rights to profits, but the remaining partners have not agreed to admit the assignee as a partner, § 7-60-127 assures that the assignee does not become a partner without the consent of the remaining partners in contravention of § 7-60-118 (1)(g). Hence, the provision that the partnership is not dissolved merely protects the original parties from an unwanted partner or from a finding of partnership from the fact of the assignee's receipt of a share of the profits. Wester & Co. v. Nestle, 669 P.2d 1046 (Colo. App. 1983).

No evidence of joint venture. Where each party was to be separately and solely responsible for the expenses involved in the development of certain land into residential building sites, one party could have enjoyed an individual profit while the other might have sustained an individual loss. For such reason, the parties cannot be said to be actual joint venturers even though the agreement between the parties provided that the "gross sales price" was to be divided equally between them. Colo. Performance v. Mariposa Assoc., 754 P.2d 401 (Colo. App. 1987).

Trial court properly found that plaintiff and defendant had not formed a partnership. There was no agreement between plaintiff and defendant to share profits and losses in the house venture, and execution of a quitclaim deed and promissory note by plaintiff indicated that defendant's contribution was a loan secured by the house as collateral. Reid v. Pyle, 51 P.3d 1064 (Colo. App. 2002).

For the relevant cases decided prior to enactment of the uniform partnership law in 1931, see Leavitt v. Windsor Land & Inv. Co., 54 F. 439 (8th Cir. 1893); Omaha & Grant Smelting & Ref. Co. v. Rucker, 6 Colo. App. 334, 40 P. 853 (1895); Mason v. Sieglitz, 22 Colo. 320, 44 P. 588 (1896); Robinson v. Compher, 13 Colo. App. 343, 57 P. 754 (1899); L. Baldwin & Co. v. Patrick, 39 Colo. 347, 91 P. 828 (1907); Kent v. Cobb, 24 Colo. App. 264, 133 P. 424 (1913); Bond-Connell Sheep & Wool Co. v. Snyder, 68 Colo. 238, 188 P. 740 (1920).

Applied in Golden v. Sanderson, 103 Colo. 359, 86 P.2d 252 (1938); Damrell v. Creagar, 42 Colo. App. 281, 599 P.2d 262 (1979); Yoder v. Hooper, 695 P.2d 1182 (Colo. App. 1984), aff'd, 737 P.2d 852 (Colo. 1987).