Legal Question in Business Law in California

Re: Power of Attorney

First, I understand what you mean by 'no partnership agreement' -- that there is no comprehensive written agreement -- but your father and his partners do indeed have an unwritten understanding which can be found by a court by reviewing how the business was conducted and by reference to general principles of partnership law, as well as any fragmentary written material such as bank signature cards, contracts with third parties, tax returns and credit applications on behalf of the partnership, and so on. This is worth mentioning because, in case of a dispute, a court or jury could 'figure out' what the deal was between the partners and make a ruling.

In general, the withdrawal of a partner terminates the partnership. A partner cannot unilaterally decide to withdraw and substitute another in his place, even if the new person is a son or daughter. Traditionally, the law would treat the old partnership as dissolved and a new partnership created......and this could only happen with the consent of ALL the persons constituting the new partnership.

Consequently, a 'power of attorney' would not be effective to give you any right to participate in the existing partnership. At best, IF the other two partners agreed to your stepping in, the business of the partnership could be continued smoothly, with or without the power of attorney.

As a practical matter, things will go badly indeed and the business could fail if the partners are malcontented with their co-partners. Therefore, the right thing to do is obtain the full consent and cooperation of the other two in reconstituting the partnership with you as one of the partners. This would be, legally, a successor partnership, but the business could be continued seamlessly.

The new partnership should have a written agreement!!!!! I also recommend a separate four-party agreement (including your father) formally terminating the former partnership and allocating its assets and liabilities. This has important income tax consequences for all concerned and inheritance tax and estate planning consequences for your father and you. Therefore, the agreement should be prepared by an attorney with tax and estate-planning experience.

By the way, traditional partnerships have fallen out of favor as a form of business organization these days, and you should give serious consideration to continuing the business as an "S" corporation or limited-liability company instead.

Re: Power of Attorney

Where are you located? I can have an associate draft a document for you fairly quickly. They will need much more informaton however at to the size of the business etc...

Michael Cortson

attorney at law

Note I pracitice in California and Indiana

Re: Power of Attorney

Generally, a partnership ends with the death or withdrawal of one of the partners. You/your father SHOULD have a written partnership agreement and/or incorporate/form an LLC. The fact that there is no partnership agreement is not a good thing for among other reasons precisely the potential difficulties that you are running into now, i.e., withdrawal/death of a partner.

Thus, it is not necessarily as simple as just drafting an assignment agreement.

You and your father should sit down with an attorney and discuss the entire matter so that a comprehensive plan can be made. You may say why do that since it has worked so well without attorneys. However, the problems arise later on when things are not so easy to resolve.

I would be happy to speak with you about this matter.

J. Caleb Donner

805-494-6557

www.donnerlaw.com

email: [email protected]

Re: Power of Attorney

If you and your father and his partners cannot agree to allowing you to take your father's place in the partnership, you may have to file for a dissolution of partnership.

Re: Power of Attorney

Partnerships are highly personal, so a change of partner requires the consent of the other partners. You and your father should first make sure his partners would agree to have you participating in the business. Then you and your father should get clear between yourselves what he will receive and what you will receive if you participate in the business. Then you should make clear with the remaining partners what they want, and find out if they will agree to a partnership agreement that contains appropriate buyout provisions - so people can die or retire without dissolving the partnersip and harming the continuity of the business.