Legal Question in Tax Law in California

Partnership Allocation of Distribution

I'm in the process of making an investment as a partner in a business of 4 partners; however, the business will be run and operated under 1 of the partners only. When handling the business financials, how should the allocation be handled in such a case to the remaining partners? Also, how should the partnership be documented? It's being handled this way is because it's a franchise and they require all owners to be involved in training and it's the remaining 3 partners can only be involved financially.


Asked on 6/01/06, 10:07 pm

1 Answer from Attorneys
Donald Field Donald L. Field, Jr., Attorney at Law

Re: Partnership Allocation of Distribution

all of this depends upon the language of the partnership agreement. the partners should retain a qualified attorney to prepare the agreement (and related necessary agreements). in addition, qualification of the franchises offered with the department of corporations may be needed.

to invest as a partner in such a business without your own legal advise is both risky (you could lose your investment if your due diligence is not complete) and dangerous (if it is a general partnership you will have joint and several liability for all debts of and judgments against the partnership). any such investment should be consistent with of a comprehensive asset protection strategy for you and an estate plan if needed.

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Answered on 6/02/06, 11:27 am


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