Legal Question in Business Law in California

If I am in business with someone and have NO partnership agreement, can I sell my half of business to someone else


Asked on 8/17/12, 8:46 pm

3 Answers from Attorneys

Sure, if you find someone foolish enough to take it with no written agreements, and knowing that your partners could then immediately dissolve the partnership.

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Answered on 8/18/12, 1:06 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

I'm not so sure.

First, if you are in business with someone, and the business isn't a corporation or an LLC, it is probably a partnership. If you don't have a written partnership agreement, do you have an oral partnership agreement? If you have neither a written nor an oral partnership agreement, but are in fact conducting business in a way that resembles a partnership, the law will provide you with a partnership agreement. You'll be presumed to be ooperating under the default provisions set forth in the California Revised Uniform Partnership Act, found in the Corporations Code at sections 16100 to 16962.

Next, a partnership is a business entity. You and your partner(s) don't own the partnership property -- the partnership owns it. All you can sell is your so-called "transferable interest" in the partnership.

If you have one other partner and you withdraw from the partnership, this will dissolve the partnership and it must be wound up and terminated under Corporations Code sections 16801 to 16807. The reason is that a partnership must have at least two partners. If you have two or more other partners, which doesn't seem to be the case, the partnership could continue under CC sections 16701 to 16705.

Another possibility is for your buyer to (a) buy you interest and (b) become admitted to the partnership as your replacement. This avoids the dissolution of the partnership, but obviously requires the agreement of your partner.

A partnership is somewhat like a marriage and you can't simply sell your partnership interest to someone else without the agreement of your partner to accept the buyer as your replacement.

The bottom line is that unless you work with your partner on your withdrawal, you'll be in a heck of a mess.

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Answered on 8/18/12, 1:52 pm
Keith E. Cooper Keith E. Cooper, Esq.

No. You need your partner's consent. You are in essence dissolving the partnership and your replacement would be creating a new one with your former partner.

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Answered on 8/27/12, 11:32 am


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