Legal Question in Business Law in California

Re: Dissolution of a Partnership

People use the term "partnership" rather loosely to describe business relationships that might in fact be something else, e.g. a closely-held corporation or a limited liability company. I assume in answering that this is a true general partnership.

In the absence of a partnership agreement that provides otherwise (and the agreement preferably is written, but it might also be oral or even implied-in-fact), the partners' rights to compensation (salary, build-up in equity account, or whatever) will be governed by one or the other of California's Uniform Partnership Acts. Which one depends upon when the partnership was formed.

I'm answering from home, and I don't have the Act in front of me, but I pretty well recall that partners are NOT entitled to expect payment, either in the form of wages or as a build-up in value of their equity (ownership) in the partnership. Only the contribution of money or tangible stuff adds to the partner's capital (at least it can), the performance of services is expected of partners. Partners were expected to take their compensation in the form of distributions of profits, not as wages.

Now, to be sure, many if not most modern partnerships have arrangements whereby partners are paid. However, as I remember the law, these arrangements have to be by agreement -- no agreement, no entitlement. So, this is probably where the other partner is coming from. He may be right, at least superficially.

The story doesn't quite end there. At least a half dozen legal theories could be raised in court to give your husband a shot at a better outcome. You'll probably need a lawyer who really understands partnership law and can study the facts of this arrangement and find the theory or theories that compel a better result.

Re: Dissolution of a Partnership

No that's not true. That's only one factor in the dissolution analysis. There are many other relevant factors. What was the course and dealing between them over time? Is there a written agreement between them? What type of business is this? Is there a business entity?

Give us a call to discuss this. We practice business transaction and litigation.

Re: Dissolution of a Partnership

This question belongs not in Lawguru.com, but in Accountingguru.com (if there is such a thing). From my memory of the college course I took in accounting: Advertising, rent, and marketing are indeed expenses, and materials are indeed assets. As a general rule, expenses don't add to the value of a business, assets do. But, again, the partners would be well advised to hire a CPA, or two if need be, to render opinion(s) as to the valuation of the business and the characterization of specific items as expenses or assets.