Which statement is true regarding the formation of partnerships?

Which statement is true regarding the formation of partnerships?

• A. A partnership must be formalized legally in writing.
• B. A partnership can exist without a formal written agreement.
• C. A partnership cannot be dissolved without legal action.
• D. Every partnership needs to register with the SEC.

Answer: (B)

The statement that a partnership can exist without a formal written agreement is accurate because partnerships can be formed through the actions and agreement of the partners, even if those agreements are not documented in writing. In many jurisdictions, a partnership can be created simply by two or more individuals engaging in a business activity together with the intention of making a profit. This is known as an informal or implied partnership. While having a written partnership agreement is advisable for clarity and to outline the respective rights and responsibilities of each partner, it is not a legal requirement for the formation of a partnership. Formal written agreements help in preventing disputes and misunderstandings but are not essential for the existence of a partnership. Consequently, many partnerships operate successfully based on verbal agreements or conduct without any written documentation, as long as the elements of partnership—such as a shared profit motive and mutual consent—are present.

The statement that a partnership can exist without a formal written agreement is accurate because partnerships can be formed through the actions and agreement of the partners, even if those agreements are not documented in writing. In many jurisdictions, a partnership can be created simply by two or more individuals engaging in a business activity together with the intention of making a profit. This is known as an informal or implied partnership. While having a written partnership agreement is advisable for clarity and to outline the respective rights and responsibilities of each partner, it is not a legal requirement for the formation of a partnership.

Formal written agreements help in preventing disputes and misunderstandings but are not essential for the existence of a partnership. Consequently, many partnerships operate successfully based on verbal agreements or conduct without any written documentation, as long as the elements of partnership—such as a shared profit motive and mutual consent—are present.