When two or more people join efforts to conduct a business without incorporating, they are deemed to have formed a partnership. However, if the business is later incorporated, the corporation is presumed to have superseded the partnership unless there is proof of a pre-incorporation agreement to continue the partnership in operation post-incorporation. If a plaintiff sues alleging a partnership, supersession by incorporation is an affirmative defense on which the defendant bears the burden of pleading and proof, and pre-incorporation agreement to maintain the partnership is a rejoinder on which plaintiff bears the burden of proof. This decision holds that, at least, in the end, the trial court correctly applied these principles in ruling on pre- and post-trial motions and jury instructions. The jury verdict in defendants’ favor was supported by substantial evidence that after incorporation, the parties acted consistently as if the business was incorporated.
California Court of Appeal, Fourth District, Division 1 (Irion, J.); March 22, 2018; 2018 WL 1417426