Legal Question in Business Law in California

The partnership is dissolved, however the process is called "dissolution and winding up" for a reason. Dissolution is only the start. The assets and liabilities of the partnership still need to be settled between you and as to the partnership's creditors, and if the business of the partnership is to continue provisions need to be made for the new business entity (whether you find a new partner, go at it as a sole proprietorship, or some oter form) to acquire the business. The two of you can do all this by agreement, or either of you can file a dissolution proceeding and have it done under court supervision and if necessary by court judgment.

First, I do not know of any statute or cases holding that filing a statement of withdrawal with the county clerk under the fictitious business name registrations laws is necessarily effective to establish a dissociation for partnership law purposes. However, California's Revised Uniform Partnership Act specifies what constitutes dissociation (withdrawal) as Corporations Code section 16601(a) as follows "A partner is dissociated from a partnership upon the occurrence of any of the following events: (1) The partnership's having notice of the partner's express will to withdraw as a partner or on a later date specified by the partner." (Then it goes on to specify about 20 other things that constitute dissociation, including bankruptcy and death). I'd say that the partner effectively dissociated when the withdrawal notice was duly published.

Next step in the analysis is to note that it is generally held in California and most other states which have enacted the RUPA that a two-person partnership ceases to exist when one of the two dissociates. These decisions are based on the statutory definition of a partnership (see Corps. Code 16101(9)) and 16202. This is despite 16201 which says that a partnership is an entity distinct from its partners. The conclusion must be that the partnership dissolved by operation of law upon the other guy's withdrawal.

The affairs of the partnership, as such, should be wound up. This does not necessarily mean that whatever business activity you were operating must cease and the assets be sold to third parties. Think of it as a store that was operated by a sole proprietor, John Doe, who has passed away. Doe's heirs can close it down or continue it, but the continued business will be a new one. The old creditors must be paid (or arrangements made for the successor business to assume the debts). It will need a new taxpayer ID number, new stationery, new bank and Board of Equalization accounts and credit arrangements. It needs a new set of books. Finally, it must settle with its previous co-owner, who is more or less entitled to be bought out at the value of a half interest in the prior partnership business - the rules are set forth in the RUPA - less damages occasioned by his dissociation, if it were "wrongful" under the partnership agreement and applicable law.

Partnerships end when a partner leaves for any reason. If a dispute arises about debts, assets, value, payments, etc. it has to be resolved among the parties or litigated. If you need legal help with any of those issues, feel free to contact me.

Partnerships don't end when a partner leaves, unless the departing partner is the next-to-last, leaving but one "partner" in the partnership. It used to be that the departure of any partner dissolved the partnership, but the 1994 RUPA changed that.