Indications of Partnership Status. Carmen Allen and Sandy Newsome, in accordance with a written agreement dated March 11, 1987, conducted a carpet and wall-covering business under the name of Newsome Carpets and Wallcovering. The agreement provided that Allen would invest 5,000 cash in the business and that Newsome would invest carpet stock, fixtures, and equipment equal in value to 5,000. On November 4, 1987, Allen and Newsome executed a document entitled Partnership Agreement that established the name, place, nature, and duration of the business and outlined the operating procedures of the firm and the rights and responsibilities of the parties. The document referred to Newsome Carpets as a partnership and to Allen and Newsome as partners, each of whom received 50 percent ownership in the firm in return for her capital investment. The next day, on November 5, articles of incorporation designating Newsome and Allen as directors of Newsome Carpets, Inc, were filed in the office of the secretary of state. Evidence at trial indicated that Allen shared profits, rendered business advice, and signed documents as a general partner of Newsome Carpets. When the corporation was subsequently dissolved, one of the creditors, Orders Distributing Co, sued Allen and Newsome as partners to recover an outstanding debt. Allen (Newsome's whereabouts were unknown when the suit was brought) claimed that the business was a corporation, not a partnership, and that she therefore could not be held personally liable for the debt. Will the court hold that Newsome Carpets was a partnership and not a corporation? Discuss.
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