Final answer:
The exception that indicates the existence of a valid partnership is the intention of dividing the profits among the individuals involved. Sharing gross receipts, paying off debts with profit shares, or sharing profits from co-owned properties do not by themselves prove a partnership. A valid partnership also means shared liabilities and responsibilities alongside profit sharing.
Step-by-step explanation:
When evaluating the existence of a valid partnership, certain elements are indicative that a partnership may indeed be in place. These include the sharing of profits and losses, a joint ownership of the business, and an equal right in the management of the business. However, there can be deceptive indicators. For example, the sharing of gross receipts does not prove a partnership exists, as it could simply be a payment for the purchase of goods or the payment of a debt. Similarly, when a person receives a share of the profits to service a debt, this is not evidence of a partnership but rather a financial arrangement.
Being co-owners who share in the profits made does not automatically constitute a partnership, as such sharing could be related to personal co-ownership arrangements, such as sharing rental income from jointly owned property. The exception, or proof of a partnership, is when there is a mutual intent among the individuals to be partners, specifically through the intention of dividing the profits amongst themselves, which implies a concerted effort to run a business together and share in its financial outcomes.
Partnerships also come with certain drawbacks. Each partner in a general partnership is responsible for the business's debts and has personal liability for the actions of the other partners. The life of the partnership is limited, meaning it must be restructured if a partner departs or passes away. On the positive side, partnerships are relatively easy to establish and manage, and they can attract additional investment more easily than sole proprietorships. However, when it comes to reducing personal liability, a limited liability partnership (LLP) may be chosen, which limits the partners' liability to their investment in the company.