When is a corporation really just a partnership?

Two guys opened a store as “handshake” partners. The business worked so well that they purchased a store building plus some other real estate and equipment. Instead of showing that the business made the purchases, they deeded the real estate directly into their joint personal names and the equipment was held personally by one or the other. While the business was growing they incorporated without making any mention as to the contribution of the equipment or the disposition of the real estate.  When one divorced, the spouse insisted the business be split.  The spouse claimed that since everything was in “partnership” it could always be split but the other guy claimed that since everything was really in “corporation” the most she could get was the value of shares. A court decided the answer in Baker v Gaul 2013-Ohio-4287. Looking at tax returns and intentions, this court said it was all corporate property.  However, this decision was based on facts elicited at trial and the next trial could go differently. A simple corporate buy-sell agreement between the two guys might have avoided a nasty court battle precipitated by a divorcing spouse. The CPA might give you a simple incorporation but the lawyer can advise about rights between business associates, corporate asset disposition and asset protection.