Uniform Outreach Doesn't Automatically Mean Joint Business

The BFH had to decide on April 14, 2005 (re XI R 82/03), on the disagreement between an office partnership (Bürogemeinschaft) regarding two attorneys and a tax advisor with their local tax office. All three professionals had their own businesses running from the same office space. They addressed and marketed to the public with the same company name, using the same letterhead, but their individual income went to individual accounts. As one attorney wanted to leave the partnership, he sold his share for € 425,000 to the tax consultant.

The attorneys believed that with the departure of one attorney and transfer of his shares to the tax consultant, they sold a share of their company. Sale of companies' shares benefit from a tax relief. The Finanzamt refused to follow this concept for this partnership and argued that though they jointly did use one company name to market their business, they were financially and structurally independent businesses.

What does it mean to be a partner in a company? It means that you have entrepreneurial initiative and entrepreneurial will. Unlike a "Gemeinschaftspraxis" (meaning partnership practice), an office sharing (Bürogemeinschaft) only serves the goal to work side by side in the same rooms and share certain costs. A uniform appearance does not automatically mean a joint business. The entrepreneurial will is also required. Such entrepreneurial will can be proved by the contract founding the persons legal relationship. Joint entrepreneurial initiative necessarily implies participation in making and not only carrying out operational decisions and sharing profit and loss alike. Participation has to be on the entrepreneurial level and not only as a managing director having his scope of discretion.

So, what went wrong? It seems that they should have cancelled everything or at least changed their contracts to adopt to the newly-wanted situation. As a golden rule of professionalism says, never professionally consult yourself because you will have a fool as a client.