“Evans
a partner in law firm” was the title of an article in The Mining Journal earlier this year. That’s not true.
I am not a partner, and none of my “partners” are partners either. Mistakes by newspapers are one thing,
but this common error has legal ramifications when committed by so-called
“partners”.
The
dead give away that I am not a partner is that I work for Kenricks, Bordeau,
Adamini, Greenlee & Keefe, P.C. By statute, our firm must include the abbreviation “P.C.” or
the actual words “Professional Corporation” because our firm is a professional
corporation and all professional corporations must have “P.C.” or “Professional
Corporation” in their names. See MCL 450.1283. Corporations have
shareholders not partners.
Similarly, a “PLC” or a “PLLC” is a “Professional Limited Liability
Company”, and it has members, not partners. MCL 450.4903. I could give other examples, but you
get the idea.
The
whole purpose of incorporating a business, creating a limited liability company
or really any other business entity other than a partnership, is to avoid
creating a partnership. That is to
say, the purpose is to limit liability.
Partnership law was originally formed by the common law, but since
around 1917 Michigan has also had a Uniform Partnership Act, which defines a
partnership as follows:
(1) A
partnership is an association of 2 or more persons, which may consist of
husband and wife, to carry on as co-owners a business for profit; any
partnership heretofore established consisting of husband and wife only, formed
since January 10, 1942 shall constitute a valid partnership.
(2) But any association formed under any other statute of this state,
or any statute adopted by authority, other than the authority of this state, is
not a partnership under this act, unless such association would have been a
partnership in this state prior to the adoption of this act; but this act shall
apply to limited partnerships except in so far as the statutes relating to such
partnerships are inconsistent herewith.
MCL
449.6. You can create a
partnership without filing any paperwork with the state; all you really need to
do is act as a partnership. Id. The reason why most people do not want
to be partners is because they want to limit their liability, and partners have
very broad liability for partnership obligations and the wrongful acts of their
partners. See MCL 449.13, 449.14, and
449.15. Moreover, even if you are
not a partner or there is no actual partnership, if you hold yourself out to
the public as a “partner” with others, you and your so-called “partners” who consent
to such statements or actions can be held liable as partners. MCL 449.16. This is called partnership by estoppel.
Id.
What’s the point
of this post? Stop calling
yourself a partner or saying you are acting in partnership with someone else
unless you actually mean it. That
is to say, unless you want to be liable for everything your partners do, stop
it. I know from a marketing
standpoint saying you’re a “partner” or that your business is in “partnership”
with another is attractive, but it’s actually dangerous. It could defeat the whole purpose of
the actual Corporation, Limited Liability Company, or other entity you formed
and are attempting to operate. It
could eliminate the liability shield the entity otherwise provides.
Don’t feel
bad if you have made this mistake.
Many people have done it. I
have seen email signatures and business cards for, and bills and letterhead
from, attorneys who called themselves “partners” when they are clearly
not. It’s one thing to adopt the
nomenclature in conversation, but to so formally and publish it is
another. Stop it!
© September 2014 Brandon J. Evans
