Legal Question in Business Law in California

Re: Business partnership and freezing assets

You should have an attorney review the partnership agreement. As others have stated, people can do whatever they want, but whether, it is legal will depend most certainly on what your husband�s agreement provides.

Contact an attorney ASAP.

Re: Business partnership and freezing assets

There would have to be grounds to take the threatened actions and the answer also depends on what the partnership agreement provides. You need to immediately seek legal counsel. There are too many variables to give you good recommendations in this forum.

Re: Business partnership and freezing assets

People CAN do anything they want. There will be consequences and remedies available if he is forced out. Feel free to have him contact me to discuss the situation and determine what he should be doing now to protect himself or to take action. It may be possible to negotiate a settlement without having to get sucked into expensive litigation.

Re: Business partnership and freezing assets

First, unless the partnership agreement provides otherwise, the partners are equal. If X and Y are partners, X has no more right to force out Y that Y has to force out X.

Next, partnerships are voluntary. If X and Y are partners, X can withdraw (technically, "dissociate") from the partnership at any time. So can Y. A corollary to this is that although X or Y can withdraw, in doing so the withdrawing partner may breach his agreement with the other partners, so while a partner always has the power to withdraw, said withdrawal may be wrongful.

Next, when a partner chooses to withdraw, the remaining partner(s) have two choices: (1) continue the partnership and buy out the withdrawing partner, or (2) dissolve and liquidate the partnership and pay everyone off, creditors first.

If the withdrawing partner is being bought out, he is entitled to the higher of the appraised going-concern value of his proportionate share, or the liquidation value of his share.

Partners are not entitled, automatically, to be employed or get paid any wage or salary; the expectation is that each will, if he wants, take draws against profits. However, the partnership can agree to employ and pay a partner for services.

There are very limited grounds for the expulsion of a partner from a partnership. As a general rule, in a two-person partnership neither partner can expel the other. Even a court can expel a partner on only certain limited grounds set forth in the Revised Uniform Partnership Act.

Unless the partnership agreement provides otherwise, all this talk about freezing assets and removing from the business sounds like a lot of bluster.

It may be time for your husband to dissociate from this partnership and demand his buy-out, which could be a goodly sum of money.