16–5. Formation. Leisa Reed and Randell Thurman lived together in Spring City, T
ID: 342677 • Letter: 1
Question
16–5. Formation. Leisa Reed and Randell Thurman lived together in Spring City, Tennessee. Randell and his father, Leroy, formed a cattle-raising operation and opened a bank account in the name of L&R Farm. Within a few years, Leroy quit the operation. Leisa and Randell each wrote a personal check for $5,000 to buy his cattle. Leisa picked up supplies, fed and administered medicine to cattle, collected hay, and participated in the bookkeeping for L&R. Later, checks drawn on her personal account for $12,000 to buy equipment and $35,000 to buy cattle were deposited into the L&R account. After several years, Leisa decided that she no longer wanted to associate with Randell, but they could not agree on a financial settlement. Was Leisa a partner in L&R? Is she entitled to half of the value of L&R’s assets? Explain. [Reed v. Thurman, 2015 WL 1119449 (Tenn.App.—Knoxville 2015)] (See Partnerships.)
Explanation / Answer
Partnerships need not be formed by a written or verbal consent, they can also be implied. In 2006, Leisa and Randell each made an equal contribution to buy Leroy's cattle. Further, Leisa has invested $47000 from her personal account into the business. Leisa was an implied partner and must get her dues with regards to L&R assets.
With regards to her partnership stake %, we will need to see all assets of L&R farm and assess partnership proportion by comparing contributions to business since Randell and Leisa paid $5000. She would be entitled to farm's stake proportionate to her partnership stake in terms of contribution.
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