What Are Your Rights to Partnership Accounts and Record Keeping?

What are the duties of partners to each other and the partnership?

A partnership may be formed whether or not the parties intend to form one, and its existence does not depend on a formal written agreement. Once a partnership is formed, then, it is important for you to know what your rights are in relation to the partnership accounts, recordkeeping, and partnership profits and losses.

Capital Contribution

The traditional “first step” in starting a partnership business requires a capital (usually cash) contribution by each of the partners into the partnership account. This contribution need not be equal, and the contribution itself is not necessarily required, as some partners may contribute their labor and skill to the partnership, rather than cash as capital. Regardless of the extent of capital contribution by each partner, the law deems each partner to have a “partner account” that is subject to several rules/limitations.

Partnership Profits and Losses

The initial partnership account is credited with the amount equal to the money and value of property contributed by the partner. As the partnership business progresses, the partner’s share of the partnership profits is added to this account. The division of profits (and losses) is left to the agreement of the parties.

Partnership Reimbursements

Any partner that acts in the “ordinary course of the business of the partnership” by making payments or taking on liabilities is entitled to reimbursement by the partnership. A partner is also entitled to reimbursement for any advance to the partnership beyond the amount of capital the partner agreed to contribute.

Record Keeping

No partnership agreement can unreasonably restrict a partner’s access to the books or records of the partnership. This right of access provides the partner, its agents, and attorneys an opportunity to inspect and copy these books and records.

Partners Should Have Access to Records

Actions for Accounting

In order to enforce your rights under your partnership, a partner may maintain an action of “accounting” against the partnership or another partner. An action for an accounting forces the partners to account to the partnership for any benefit or profits derived from any transaction connected with the formation, conduct or termination of the partnership or from any use of partnership property.

Other than actions dealing with the end of a partnership or the withdrawal of a partnership, partners are given the right to a formal accounting when:

· The right exists under the partnership agreement;

· A partner is excluded from the business or possession of its property by copartners; and/or

· Any other circumstances that render it just and reasonable.

Getting Legal Help

It is important to stay informed about your partnership’s profits, losses, and record keeping. Know your rights when a partnership dispute arises. Contact Brown & Charbonneau, LLP today by calling 714-505-3000 or email inquiries@bc-llp.com to schedule your appointment.

For the latest legal news, follow Brown & Charbonneau, LLP on Twitter and join us on Facebook, Instagram, and LinkedIn.

Brown & Charbonneau, LLP is a top-rated business litigation, corporate, real estate and family law firm in Irvine, California. We are honored to be named by Best’s Lawyers® as one of the Top Law Firms in the US, including the specialty area of commercial litigation. As an AV-rated law firm, we are proud of our 10.0 Superb Client Rating from Avvo. Our top-reviewed Southern California attorneys have also earned specializations from the State Bar of California, as Certified Trial Specialists, and are included amongst the elite attorneys to be named Super Lawyers®.

Should you have any other issues involving any of the below areas of practice, please feel free to contact us.

Our website is full of valuable information and resources. Our goal is to provide as much information as possible to assist all our clients in making fully informed decisions. Just click any area of interest.

Brown & Charbonneau, LLP publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please visit www.bc-llp.com/contact-us. The mailing of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm.

Categories

Archives