Legal Question in Business Law in California

Re: Business transfer

First, you should verify your information about being involved in the business preventing one from receiving social security benefits. The law has changed regarding this; if your father is "full retirement age," which varies depending upon birth year but is usually around age 66 or so, he can continue to work and earn without loss of social security benefits. There is an adverse consequence, however, because his medicare premium will be higher if he is working and making good money at it; still, most find they are better off taking their social security at their retirement age and continuing to work if they want to. I'd suggest that your father discuss all of this with an advisor at the local social security office.

If his decision is to stop working and withdraw from the partnership, there are two or three basic steps that should be taken. First, the partnership or the remaining partners need to buy him out. The fair amount is determined either by agreement, by paying the amount of his capital account, or if this fails, by appraisal. Hopefully, your written partnership agreement already provides for withdrawal of a partner. If not, ask your accountant to provie you (or determine) his capital account, or the family should get together and negotiate a buy-out price. If the business isn't worth very much, maybe you could agree on a nominal amount, like $100.

The next step is to amend your written partnership agreement and have your accountant adjust the books to show withdrawal and buy-out of one of the three partners.

Finally, notify everyone - the bank, the suppliers, the landlord, the customers - that he is no longer a partner in the firm. You'll also need to refile your fictitious business name to take him off that.

You might want to look at Corporations Code sections 16701 to 16705 which cover withdrawal of a partner where the partnership continues in business. Note that per section 16704, if the partnership has been registered with the Secretary of State, it can file a notice with the S/S of that partner's withdrawal.