Legal Memorandum: Oral Partnership Agreements in MN

Issue: Is an oral agreement sufficient to establish a partnership in Minnesota?

See Spearman v. Salimen, 379 N.W.2d 627, 631 (Minn. Ct. App. 1986), called into doubt on other grounds by de Beer v. Callahan, No. A05-2042 (Minn. Ct. App. Sept. 12, 2006).  In brief, the law is that

[a]n oral agreement is generally sufficient to establish a partnership.  Sit v. T M Properties, Inc., 408 N.W.2d 182, 185 (Minn. App.1987).  Whether the parties intended to form a partnership is determined from all the evidence and circumstances.  McAlpine v. Millen, 104 Minn. 289, 297-98, 116 N .W. 583, 586 (1908).  The existence of a partnership is generally a question of fact.  Cyrus v. Cyrus, 242 Minn. 180, 183, 64 N.W.2d 538, 541 (1954).  A partnership is an association of two or more persons to carry on as co-owners a business for profit . . . not formed under some other statutory provision.  Minn. Stat. 323.02, subd. 8 (2000).  It is formed when the parties have decided to combine their property, labor, and skill for profit.  Cyrus, 242 Minn. at 184, 64 N.W.2d at 541.  The parties may choose the extent to which each partner manages or contributes to the partnership.  McAlpine, 104 Minn. at 298, 116 N.W.2d at 586.  While the sharing of gross returns alone does not establish a partnership, the receipt of a share of the profits is prima facie evidence of partnership.  Minn. Stat. 323.06(3), (4) (2000).

Severson v. Kevin […]