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CalAttorney2
CalAttorney2, Attorney
Category: Business Law
Satisfied Customers: 10238
Experience:  I am a businesses law attorney, with experience advising and representing owners and investors.
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I am 50% owner of a business. I am looking to dissolve my

Customer Question

I am 50% owner of a business. I am looking to dissolve my portion of the partnership. I am asking my partner to pay what I have invested monetarily and for the time I have worked and not been paid. She would then have full ownership of the business.
My question is - am I entitled to be paid for time I have worked?
Submitted: 11 months ago.
Category: Business Law
Expert:  CalAttorney2 replied 11 months ago.

Dear Customer,

Generally, partners are not compensated for their time.

However, if you have an agreement where the partners are paid for their time and effort, then you should be compensated under that partnership agreement.

Once you have identified the portion of your partnership agreement that entitles you to compensation for payment, present that, together with an accounting showing the value of your services to date, and an offer to be bought out of the partnership.

If you cannot reach a settlement agreement that allows you to dissolve the partnership (remember, the two of you must agree to dissolve the partnership), then you do have a right to file what is called a "dissolution action" with the court that dissolves the partnership by selling off all of the partnership assets, paying any debts, the distributing the remainder between the partners. (This is not a very economical way to dissolve a partnership).

Short of filing a lawsuit, you can try to mediate the dispute with them - contact your local bar association and request referrals to mediators, a third party neutral can often help you reach a mutually agreeable resolution. Use the bar association's referrals to contact a mediator or two, the mediator will then contact the other party to set up a mediation session, and you can go from there - hopefully resulting in a formal or written settlement agreement, and save yourself the time and expense of litigation.

Customer: replied 11 months ago.
I am to understand, I am not entitled to any form a compensation for my work, although she is receiving compensation. She runs the business full time and I have another job full time
Expert:  CalAttorney2 replied 11 months ago.

Dear Customer,

It depends on what your partnership agreement is.

In general though, the state will not impose a compensation for partnership work onto the partnership.

If your partner is being compensated for her work, you should be as well.

Customer: replied 11 months ago.
unfortunately we don't have a partnership agreement, it is not working out and I want out. She is willing to pay what I have invested but not for any time I have worked. I'm trying to understand my legal rights so I can negotiate equitably
Expert:  CalAttorney2 replied 11 months ago.

If she is being paid, then you should as well.

This is going to be based on equitable principles as opposed to a strict contract basis - but your claim is going to be that if she isn't going to compensate you, you are going to pursue her for "breach of fiduciary duty" for removing partnership assets to pay herself without authorization.

Bot***** *****ne - this will not end well for either of you if you cannot resolve it between yourselves (very few small partnerships have sufficient assets to warrant going to court over - where it takes a lot of time and money to litigate), but please do consider mediation if you are unable to reach a resolution amicably - it is very effective.

Customer: replied 11 months ago.
mediation is our next step. But I wanted to know my legal rights before going into this mediation. As I was reviewing your answer it made me think. I am asking her to compensate me at an hourly rate higher than she is currently receiving. I based my amount on current industry standards
Expert:  CalAttorney2 replied 11 months ago.

Mediation is a chance to negotiate a "mutually agreeable resolution." Your mediator can help you move towards such a resolution.

Whether or not you find a common ground is something that the two of you will have to work out. You may not find this in the mediation session itself - but most mediators will continue to work with you even afterwards as you work towards a settlement (it is not uncommon for parties to leave a mediation, think about issues, or look into things, contact the mediator to pass through some counter-offers, etc. and then reach a resolution.

Customer: replied 11 months ago.
any other advice to offer, something I may not be thinking about
Expert:  CalAttorney2 replied 11 months ago.

Not really.

Use the mediation as an opportunity to avoid litigation.

The backdrop to your mediation is that you can sue to dissolve the partnership - sell all the assets, pay off the debts, and divide the remainder (if there is any)/pay off the debts (split between the two of you (if you owe more than there is).

So this is a valuable opportunity, not just a formality.

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