Legal Question in Business Law in California

Re: Dissolving an unfiled partnership

You cannot file either a Statement of Dissociation (Secretary of State Form GP-3) or a Statement of Dissolution (Form GP-4) unless the partnership has previously filed a Form GP-1 Statement of Partnership Authority. See the instructions for each of these documents on Page 2 of each on the SS's Web site at www.ss.ca.gov.

There are several ways that a corporation can continue the business of a general partnership. Perhaps the easiest is to form the corporation, then have each former partner transfer his or her interest to the corporation. In return, the corporation would give shares of stock to whomever wants to stick with the business, and money to whomever doesn't. The money, in turn, would be provided to the corporation as an investment (stock purchase or perhaps loan) by the partner that wants to continue.

All of this is pretty technical and fraught with legal pitfalls. You should have a lawyer explain and document each step.

In any event, be sure of three things: (1) that the breakup is essentially fair to both partners, money-wise and otherwise; (2) that everything is set down in writing and signed off upon by both; and (3) perhaps most important of all, ALL partnernship obligations (supplier and employee debts, tax filings and payments, etc.) are handled.

You might also want to skim the California version of the Uniform Partnership Act of 1994, which begins at Corporations Code section 16100 and runs through 16962. Of particular interest should be the sections dealing with dissociation, dissolution, windup, termination and conversion, which tend to be in the 16601-16901 series of chapters.