Answer to Question #52025 in Law for Bob

Question

In 2006, Sally opened a restaurant called Traders’ Place in rented premises in Ottawa’s booming financial district. She operated the restaurant as a sole proprietorship. By 2012, the business had grown and she determined that she needed experienced help to run the business. In November 2012, Sally approached Marty to see if he would become the manager of the Traders’ Place business. He agreed and the following were the terms of his agreement with Sally.

Each month, Marty was paid $1000 plus 1 percent of the total restaurant revenues for that month. Total monthly revenues, on average, were about $100 000. At the end of each complete calendar year that Marty worked, if the restaurant had made a profit for the year equal to or exceeding $200 000, Marty was entitled to receive 10 percent of the profits.

Marty was responsible for managing the restaurant, including
opening and closing the restaurant,
hiring, firing and scheduling staff, and
ordering food and paying suppliers.

Sally was responsible for the financial side of the business, including budgeting, accounting and payroll, as well as marketing. In 2013, Traders’ Place profits exceeded $200 000 and Marty was paid 10 percent of the profits in accordance with the agreement.

Are Marty and Sally carrying on business as a partnership?

Answer 1

As Sally approached Marty to become the manager of the Traders’ Place business, and Marty is responsible for managing the restaurant, including opening and closing the restaurant, hiring, firing and scheduling staff, and ordering food and paying suppliers, then Sally is still carrying on business as a sole proprietor, but not partnership, and Marty is just a manager.