How Do I Get Out of Partnership?
Getting into a partnership, like a marriage, is easy. Getting out, however, is also like a marriage and is at times quite challenging!
1. Review the Partnership Agreement
First, if you have a Partnership Agreement, it may provide your options for exiting or dissolving the partnership. Revisit the Agreement and review your options. If you do not have a Partnership Agreement that outlines an exit or dissolution strategy, you and the remaining partners can try to work out the terms together. If the terms of the split cannot be resolved amicably, the Court can divide the partnership’s assets and liabilities. Absent a Partnership Agreement, general partnership law applies, as codified in Corporations Code Section 16000 et seq. and Business & Professions Code.
For help with your partnership dispute, let the Irvine partnership lawyers help you. Call us today to get help now 714 505-3000.
2. Is a Buy-out an Option?
If the partnership wants to continue without you, it may be interested in purchasing your interest. If there is a Partnership Agreement, the formula may already be established. If there is no set formula, the buy-out price may be based on the liquidated value of the partnership or the sale of the business as a going concern, whichever is greater. There is no set formula here
If an agreement on a buy-out cannot be reached, the business in many cases will have to be dissolved. This can be accomplished by agreement amongst the partners or by a provision in the Partnership Agreement. If there is no agreement or procedure set forth, Judicial Dissolution is likely. In California, the partnership must file a Statement of Dissolution with the Secretary of State. The partnership is then responsible for distributing or liquidating the partnership assets. It must also inform all known creditors, vendors, suppliers, and customers that the partnership is being dissolved. In addition, the partnership must publish notice of the dissolution in a paper “of general circulation” for twelve (12) consecutive days. After a partnership has been dissolved, no partner may transact on behalf of the partnership. In addition, unknown creditors will have 90 days to make any unknown debts known. Consult your CPA to address any tax issues.
4. Legal Action
If the partners cannot work it out, then legal action may be the only option. There also may be wrongful acts by one or more of your partners that require legal intervention. These include breach of contract, fraud, breach of fiduciary duty and others. To learn about some of the these types of wrongful acts, watch our videos.
Again, check the written Partnership Agreement first if you have one. If not, your best bet is to try to work out an agreeable split amongst the partners. If a Judicial buy-out or dissolution is required, then call us today for more information on your options, call business attorney Gregory G. Brown at 714.505.300 or visit our website at www.bc-llp.com.