Legal Question in Business Law in California

the partners need to work out either a dissolution procedure or a purchase agreement that gives specific rights to specific partners as they go separate ways. Our firm has experience drafting and negotiating these agreements. Should you require assistance with this matter, then contact our office. Contact information is on our website at www.higagipsonllp.com

Since you don't specify otherwise, I have to assume this is truly a general partnership, although I know that persons involved together in small businesses which are actually corporations or LLCs sometime (erroneously) refer to each other as "partners."

Whan a partnership breaks up, there are two sets of controlling rules. The first is the partnership agreement itself, which may be express or implied. Further, express agreements are subdivided into written and oral. Implied agreements are neither written nor oral, but can be inferred to exist, and many of the terms inferred, from the conduct of the partners. The second set of controlling rules is the applicable law, usually the California version of the Revised Uniform Partnership Act, or "RUPA," which is codified in the Corporations Code (even though it doesn't deal with corporations!) as sections 16100 et seq.

Between the agreement and the RUPA, you will find there is a pretty well define set of rules and procedures that will govern you and our (former) associates in dissolving and winding down the affairs of the partnership and also how you may take over part of the former partnership's assets, such as its name, credit lines, etc. I advise you stringly to AVOID gut instincts or unprofessional advice. This is a tricky area of the law, and you could set up a situation in which you become, or remain, liable for business debts or claims from former partners if you aren't very careful, deliberate, and well-counseled.

On the other hand, it isn't rocket science to salvage the viable parts of a dissolved partnership and continue it -- it happes to law firms all the time! Just don't try to do it yourself. There are major liability issues lurking.

You should have an attorney dissolve the partnership and settle with the partners. Contact me directly.

A "business divorce" can be complicated depending on the business structure and the existing documentation. If done incorrectly, parties can end up with unintended liabilities. I had someone come to me who had been bought out of a franchise store, and was now being sued by the franchisor for business debts incurred by the franchise after she left. Her former partner had filed bankruptcy, and she had failed to notify the franchisor that she sold her interest. Because of this, she was still legally liable on the franchise agreement for products purchased by her ex-partner. Same sort of thing can happen with a company credit card, or a line of credit. Banks sue former partners to recover money due on LOCs and credit cards all the time.

Be very careful, you should consult with someone who knows what they are doing in this area. I'd be happy to answer more detailed questions via email. You can reach me at [email protected]