Legal Question in Business Law in California

What you can do and what you might be willing to do may be two different things. He is still liable for the debts of course.

If you are inclined to buy him out and you believe what you proposed is fair, then this is a good option.

If you are seeking more guidance, you really need to consult a lawyer in private and discuss a best course of action. Yours is a fact intensive scenario and there is no out-of-the-box answer here.

If you would like to discuss further over a free phone consult, feel free to contact me anytime that is convenient.

Kind regards,

Frank

www.LanternLegal.com

866-871-8655

[email protected]

DISCLAIMER: this is not intended to be specific legal advice and should not be relied upon as such. No attorney-client relationship is formed on the basis of this posting.

First, is the business really organized as a general partnership, as opposed to, say, an LLC or a corporation? Sometimes co-owners of other kinds of businesses refer to each other as "partners" when in fact they are not.

Assuming the business is a partnership, then what does the partnership agreement say about such matters as covering operating cash flow needs, capital contributions, buy-outs, etc.? If there is a written agreement (not essential), it's likely to cover some or all of the questions you are now confronting..

If there is no oral or written agreement covering the current problems, there will probably be provisions of California's partnership law that apply......see Corporations Code sections 16100 et seq., especially 16401 and 16404.

Finally, perhaps you should be a little cautious about saying the partnership is worth $250,000. If you partner withdraws, he'd be entitled to be cashed out for 1/2 of the value of the business (see Corporations Code section 16701) and if you've been insisting on a high value, you might have a hard time changing gears when his share of the business was appraised for purposes of cashing him out. Maybe you should consult a CPA with small restaurant experience and have him/her take a look at both the operating accounts and the capital accounts to give you a better idea of what the true market value of the restaurant business is in today's market and whether there are any obvious steps that could be taken to improve the outlook. You may also need a lawyer, but I think a CPA with a specialization in small restaurants is going to give you the most bang for the buck.

There is no magic wand here. If the business has substantial debt and tax liability, and is not making a profit, and is losing money such that you have to 'feed' it regularly, then it probably is worth very little.

If you want to buy him out and he won't agree to your estimate, you could have it professionally appraised and agree in advance to not dispute that valuation. You may need an attorney's help in working out an agreement to do that.

If he refuses to cooperate at all, you could end up filing a lawsuit for various causes of action to dissolve the relationship, whether partnership or corporation.

All these things will cost money and legal fees, so decide what makes economic sense for you to do, since it is you that will be paying those costs.

If serious about hiring counsel to help in this, feel free to contact me. I�ll be happy to help fight and get the best outcome possible for you. I've been doing theses things for many years.