Legal Question in Business Law in California

Re: Partnership agreements

Usually a partnership agreement provides for all of those contingencies. You own an interest in the business, but the terms of your ownership are governed by the partnership agreement. It sound vaguely like there is provision made for your situation, but no one can truly advise you without reading the agreement.

Re: Partnership agreements

I'm not sure exactly what you mean by asking "how strong" a partnership agreement is; as with any contract, if a dispute comes before a court, it will be enforced so as to carry out the intent of the partners or to do justice, whatever that may be. In a sense, partnership agreements are subject to more stringent enforcement because people who form partnerships place themselves in more trusting and more vulnerable positions with respect to one another than the parties to ordinary contracts.

You say your agreement is "50-50," but partnerships are not always that simple. For example, you might divide decision-making 50-50, profit sharing 40-60, tax benefits 90-10, and capital repayment in liquidation 55-45. It would be interesting to know what this business was worth when you became a partner, and what you paid for your 50% interest. If the existing business was worth, say, $500,000, and you contributed less than $500,000 in money, equipment, patents, etc. for your supposed 50% share, you might have a proof problem in court.

Partnership law is pretty cut and dried as to what happens when a partnership is dissolved. The court would first look at the agreement, then apply the Uniform Partnership Act to the extent the agreement didn't modify the general legal provisions applying to dissolutions and wind-ups.

Generally, what you can get back upon dissolution is not so much determined by the absolute dollar amount of your investment as by your so-called "capital account" which would be related to your percentage ownership and the net worth of the partnership.

In other words, if you invested $500,000 for 50% of the partnership, but its net capital at dissolution was only $600,000, you would be entitled, most likely, to about $300,000.

Finally, the rights of partners upon dissolution may depend upon whether a partner has withdrawn wrongfully. The law gives reduced rights to partners who pull out contrary to agreement.

Re: Partnership agreements

You are entitled to 50 percent. If litigation is neceseary, a receiver can be appointed to sell the business so you can get your 1/2. Also, it is best that an accounting - final be completed.

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