The correct answer is: A. A person who receives profits is always a partner.
A person who receives profits is not necessarily a partner. For example, a creditor may receive profits from a business as part of a debt repayment plan, but this does not make them a partner in the business.
A partnership is a legal relationship between two or more people who agree to share in the profits and losses of a business. The true test of partnership is the mutual agency, i.e., agency relationship among partners. This means that each partner has the authority to act on behalf of the other partners, and each partner is liable for the debts and obligations of the partnership.
A partnership can come into existence only through an agreement. This agreement can be written or oral, but it is important to have a written agreement in place to avoid any misunderstandings. The agreement should state the names of the partners, the purpose of the partnership, the contributions of each partner, the division of profits and losses, and the management of the partnership.
It is important to note that a partnership is not the same as a sole proprietorship. A sole proprietorship is a business owned and operated by one person. The sole proprietor is personally liable for the debts and obligations of the business. A partnership, on the other hand, is a business owned and operated by two or more people. The partners are jointly and severally liable for the debts and obligations of the partnership. This means that each partner is personally liable for all of the debts and obligations of the partnership, even if they were not involved in incurring the debt or obligation.
If you are considering forming a partnership, it is important to speak with an attorney to discuss the risks and benefits of this type of business structure.