Story Case

Hans Larson, transacting business as " Larson, the Shoemaker," offered to allow Sidney Johnson, an employee, to become an associate with him in the business. No formalities were observed in the agreement; Larson merely said to Johnson, "Sidney, if you continue the good work you are now doing, I'll consider you in partnership with me; I will give you a one-fifth interest in the business and, consequently, in the profits, and you will receive also your usual salary." Johnson acquiesced in this agreement, but the business continued under the same name - "Larson, the Shoemaker." Two months later, Larson tried to sever his relations with Johnson, and, among other reasons, contended that no partnership existed because no firm name was adopted, that is, the same name which had been previously and always associated with the business continued to be used.

Ruling Court Case. Johnson Bros. Vs. Carter And Company, Volume 120 Iowa Reports, Page 355; Same Case, Volume 94 Northwestern Reports, Page 850

T. E. Carter entered into a subcontract with Kah-man and Company to do some work upon grading the road bed for the Ft. Dodge and Omaha Railway Company. As he had not sufficient capital to finance the work he had contracted to do, he went to Brown, a banker, and agreed to give him one-half of the profits to be derived from the performance of his contract, if the latter would furnish the necessary capital and also one man to keep books. Brown accepted the proposition, and a man by name of Campbell was engaged by Brown as bookkeeper. The business was conducted in the name of "Carter and Company"; Brown honored sight drafts on his bank, signed "Carter and Company," and received notes so signed for moneys advanced in the completion of the work. When the work was done, Carter executed his note to Brown for one-half of the profits of the contract.

This action was brought by Johnson Bros, upon a note signed by Carter and Company; it was claimed that Brown was a member of Carter and Company as a partner, and therefore, liable upon the note as a partner.

Decision

The Court was of the opinion that a partnership did exist and that Brown was a member thereof, even though his name did not appear in the name under which the business was carried on. Mr. Justice Ladd said in part: "The use of the term 'partnership' is not essential, and the adoption of a firm name may be dispensed with. The facts of no two cases are alike. The only crucial test seems to be the intention of the parties. * * * If the essential characteristics of a partnership exist, then there is a partnership, whether it is called such or not, and whether a name exists or not." Judgment is given for the plaintiff.

Ruling Law. Story Case Answer

Although it is usual that a partnership should have a firm name, it is not an essential element of its existence. It is only a matter for the convenience of the members composing the firm. The partnership, unlike a corporation, is not a separate and distinct entity from its members. The firm name, if one is adopted, may be of almost any choice so long as it does not infringe upon the rights of other persons, and provided that there are no statutory regulations. The partners may compound all their names as a firm name, or it may be that one alone may be used, or they may adopt a wholly fictitious name.

Even if no name has been adopted by agreement, if they permit their business to be associated with a certain name, so that such name becomes a firm name by reputation, they will be treated as having adopted that name as a firm name. Larson, the Shoemaker, could be a firm name as well as Larson and Johnson, and the fact that no firm name was adopted when the partnership was formed is immaterial.