Chan sold a business to Scott and in the process they valued the good will of the business at $50,000. In the sale contract, it was agreed that this amount would be paid by Scott giving Chan 15% of the business profits until it was paid. This creates a partnership between them.

Question

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The arrangement to pay for goodwill with a percentage of profits does not necessarily create a partnership between Chan and Scott. It could simply be a payment term for the purchase of the business. A partnership typically involves a mutual agreement to share in profits and losses and to jointly manage the business, which is not clearly indicated by this arrangement alone.

Chan Sold a Business to Scott and in the Process