Florida Business Law – Partnerships by Estoppel
Under Florida Law, a partnership is defined as “an association of two or more persons to carry on as co-owners a business for profit,” other than other types of business entities formed under statute (such as limited liability companies or corporations). Florida does not require any filing to form a partnership; what this means is that it is legally sufficient that two parties intend to “carry on as co-owners a business for profit” for a partnership to be formed.
Under traditional common law principles, a partnership was not considered an entity separate from its owners. The Florida Revised Uniform Partnership Act, however, codified common law principles and clarifies that a partnership is an entity distinct from its owners. This change clarified an issue which arose often under the common law principles – if the partnership was not a separate entity, but was the aggregate of the partners, then a new partnership was formed each time a member left or a new member was added to the partnership. This of course made for confusing and complex legal issues when it came to determining partnership liabilities. Under Florida’s current system, the partnership remains in existence despite a change in the composition of the partners.
Current Florida law continues with the common law tradition of “joint and several liability” among the partners. What this means is that all partners are all fully liable for any debts incurred by the partnership in the course of business, regardless of their proportionate investment or control in the partnership.
The joint and several liability doctrine as applied to partnerships as well as the lack of a filing requirement in Florida in regard to partnership formation create an issue of which any person conducting business in state should be aware. Partnership by estoppel is a doctrine by which a court will consider a person a partner even if there was no partnership agreement (written, verbal, or otherwise) between the parties. What this means is that an individual, though their conduct, could be taking on the full liability for any debts or damages the partnership may owe to a third party.
Common ways for an individual to be held liable as a partner by estoppel include giving a third party the impression that the person is a partner, or if a third party extends credit to an individual believing them to be a member of the partnership. A partnership by estoppel is found by courts when the actions of the parties involved in conducting business fit the definition of two parties intending to “carry on as co-owners a business for profit,” regardless of the subjective intent of the parties.
If you are currently conducting business with another person, whether you have a home-based business with your brother-in-law or starting a restaurant with your friend, you may be acting as a partnership without even knowing it. As discussed above, this type of conduct could potentially expose you to full liability for the actions of another. By calling one of our experienced Florida business lawyers at (954)-779-7009 to discuss your situation, we can determine your risk and work with you to find a solution that minimizes your potential exposure.