Are Group Blogs Partnerships?

Section 202(a) of the Uniform Partnership Act (1997) defines a partnership as an "association of two or more persons to carry on as co-owners a business for profit ..., whether or not the persons intend to form a partnership." With that definition in mind, consider the following excerpt from a post by my UCLA colleague Eugene Volokh on his group blog The Volokh Conspiracy:

A reader e-mailed to ask how he could put a tip in our tip jar, and I realized that we didn't have one. While we were entirely noncommercial, income would have just caused hassles (I'm thinking blood-covered knives around the monthly Volokh Co-Bloggers Campfire); but now that we've started having ads, shifted to a commercial service provider, and worked out a way of splitting the loot, I thought we might as well make it easy for people to give to us if they want to.

This would make a really good exam question for my Business Associations class: Is the Volokh Conspiracy a partnership?

Here's how I would analyze that question. (Obviously, the following is not offered as legal advice and should not be taken as such.)

1. Are there two or more persons? Yes.
2. Are they co-owners? Comment 1 to UPA (1997) § 202 makes clear that the purpose of the co-ownership language is to distinguish the partnership from the agency relationship. Hence, unless Eugene could show that the other Conspirators are mere agents, this element of the test should not be a serious barrier to finding that a partnership exists. As to that question, the Comment further explains that ownership normally connotes control, so the key issue may be whether the other Conspirators exercise joint control over blog decision making.
3. Is the blog a business? UPA (1997) § 101 defines a business to include "every trade, occupation, and profession." Just as writing an online magazine would qualify as a trade (journalism), so maintaining a web log almost certainly qualifies. As I explain in my book Agency, Partnerships & LLCs (at 102), "this definition is sufficiently sweeping to encompass just about any for profit venture." Indeed, Comment 1 to UPA (1997) § 202 characterizes a business as "a series of acts directed toward an end," which surely encompasses blogs.
4. Are they doing it for a profit? They admit that they've "started having ads, shifted to a commercial service provider, and worked out a way of splitting the loot." The emphasized language is especially critical. UPA (1997) § 202(b) provides, in pertinent part that: "A person who receives a share of the profits of a business is presumed to be a partner in the business, unless the profits were received in payment ... (ii) for services as an independent contractor or of wages or other compensation to an employee." Hence, unless Eugene can rebut that presumption by showing that he employs the other Conspirators or that they are independent contractors, they've got themselves a partnership. Suppose, for example, that Eugene collects all the money, pays all the expenses, and then compensates his fellow Conspirators according to some schedule. In that case, he'd have a pretty good argument that he's the sole proprietor and the rest of the Conspirators are independent contractors. (Again, a key issue may be the extent to which the other Conspirators have control rights.)

Of course, if they have a partnership, what they have is a general partnership. If I'm right about that, they might be well-advised to consider setting up a Limited Liability Company or Limited Liability Partnership. Why? Go buy my book.

What follows if The Volokh Conspiracy is a partnership? For one thing, they will need for file a partnership tax return. (Check out this story, which is actually an old Dave Barry column although it's hard to tell that from the website.) Because the name of the business does not include the name of all the members of the partnership, they need to file a fictitious business name statement. They all now have ownership stakes in the intellectual property, including trademarks and so on. And this just starts to scratch the surface.

Here's a related question, which is more for the transactional lawyers in the audience: How do you suppose they are "splitting the loot"? The default rule of partnership law, set out in UPA (1997) § 401 is equal shares. As a default rule, however, this is subject to contrary agreement of the parties. (In many states, the default rule is that members of LLCs split profits according to their respective capital contributions, which is essentially how corporations work too.) Did the Conspirators go with equal shares or according to capital contributions (if any) or rate of blog posts or any one of a number of other plausible solutions?

What would you do under the circumstances? It's actually a very interesting problem of designing compensation to provide the right incentives. At first blush, I would probably want some correlation to the amount of posting done. When was the last time you saw Russell Korobkin contribute? On the other hand, you wouldn't want to create an incentive for members to post any old crap.

So if you're a member of a group blog that has ads or other revenue sources, you might want to ponder these and many related questions. Whatever you do, however, do NOT email me for advice. Seriously. Don't even think about it. (Feel free, however, to go buy my book.)