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My business partner is cancelling promotional events in the…

My business partner is...

My business partner is cancelling promotional events in the summer without my consent. If he tries to dissolve the partnership and I want to continue running the business what happens? Does he just leave and I continue to operate the business?

Lawyer's Assistant: What state are you in? It matters because laws vary by location.

BC Canada

Lawyer's Assistant: Has anything been filed or reported?

No. He has just informed me that he does not want the business to take on any liabilities after June 4th but i want to continue the business and it will require expenses to be incurred.

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Answered in 13 minutes by:
3/11/2018
Debra
Debra, Lawyer
Category: Canada Law
Satisfied Customers: 105,582
Experience: Lawyer
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Hello! My name is Debra (formerly known as Legal Ease). Thank you for your question. I'm reviewing it now, and will post back again shortly.

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I am sorry to hear this.

Is this a corporation?

Is there a partnership agreement?

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Customer reply replied 4 months ago
This is a general partnership and there is no partnership agreement.

Does he want out or what is his goal?

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Customer reply replied 4 months ago
I'm not sure of his goal. I think his goal is to make it tough for me in the business until i agree to slit it up or sell to him. I would love to buy him out. My ultimate goal is that I continue on in this business without him. I'm worried that he will try to dissolve the partnership and somehow end up with the business name and database, all I want to do is continue on with the business, Ideally without him but if he wants to leave I'm more than happy to let him leave, or pay him to leave. He has just notified me that he does not consent to any liabilities after June 4th. I just want to be able to operate the business as usual, which will require certain small expenses to be incurred.

Did you ask him what he wants?

Debra
Debra, Lawyer
Category: Canada Law
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Customer reply replied 4 months ago
I have not asked him directly but I gave him 3 options for moving forward.
1. wipe the slate clean, come up with a partnership agreement, and work with a mediator to help us work better together
2. continue on as is and just do whats best for the business
3. I buy him out with a non compete in our immediate area.He responded to this by saying "just a heads up I have determine that there are 15k in profits, therefore I'm taking 7.5k out of the bank today"I think what he wants is to not work with me but to be able to continue the business, or to split things up in a very convoluted way
Phone call session started
Customer reply replied 4 months ago
Hi DebIt was great speaking with you yesterday. My partner has informed me once again he does not consent to any liabilities including taking registrations for further programs after June 4. He is literally trying to grind the business to a hault. Can he do that? Or do I have a right to continue to operate the business in a normal fashion? It is my livelihood and he is now starting to prevent me from earning a living. I will be speaking with my lawyer today about getting him a letter trying to remove him from the business.

He cannot stop you. But what you don't want is a situation where you do use business funds for the business and he says he wants half of what was there June 4 for example.

But for now, as you are speaking to your lawyer today I suggest not saying a thing to your partner at all but let it all come from the lawyer.

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Customer reply replied 4 months ago
if we take registrations and money for programs that start in the fall he would be entitled to half that money if it is in the account before. June 4?

He really would not. That is not how your business has been set up. But he could try and claim it.

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Customer reply replied 4 months ago
Hi Deb.I spoke with a lawyer in BC today and he mentioned that if this ends up in court, or in a partnership dissolution in BC there is no consideration given to the fact the business was my idea and I asked him to join the partnership. That basically everything is sold and split, including the name of the business and the client list. It's a little different from what we discussed. You had mentioned there would be consideration given to the fact it was my idea and I asked him to join the partnership. Were you speaking from experience with Ontatio Law or BC Law? The lawyer said that my partner can dissolve to partnership in which case everything will be sold for maximum value and split up.

Each case is different but my point was that if you wanted to buy him out or he wanted to buy you out your case is much stronger than his.

So if you apply for an order that he gets bought out and you continue the business you should win.

In terms of the name, whomever thought of it owns the intellectual property rights to the name.

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Customer reply replied 4 months ago
okay so what would i have to do to file an order that he be bought out? you can do that in BC?

I think you would have your lawyer send the threatening letter and make it clear that you will proceed to court if necessary but you hope to end this amicably. Then you can even (in the letter) ask him to provide an offer of what he wants to leave.

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Customer reply replied 4 months ago
I think his plan may be to try to dissolve the partnership after the June 4th. In which case I was told everything gets sold off regardless of whether I want to continue on in the business or not. Is there any precedent for a court to decree that a partner sells to another partner?

It is not a separate legal entity so it is more complicated and I don't know specifically what you are selling but in most cases you could get an order allowing you to get a right of first refusal so that all that is sold could be bought by you at the price that someone else offers it.

And if the name is ***** ***** you would continue using it and proceed as you wish.

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Customer reply replied 4 months ago
It basically a volleyball program for kids. We are now up to almost 1000 kids. So the name and the database of contacts are really the most important.

I don't see the court making you split that up and then become direct competitors nor do I see the court requiring you to sell all that to a stranger.

I still believe a court will allow you the opportunity to buy him out at fair market value.

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Customer reply replied 4 months ago
I sure hope you're right haha. The lawyer I was speaking to said it's different in BC than Ontario. I'm still a little confused as to what happens if he wants to dissolve the partnership and I want to continue the business? Can one person dissolve the partnership or just leave the partnership?In BC the partnership act states
Dissolution of partnership
35 (1) Subject to any agreement between the partners, a partnership is dissolved(a) if entered into for a set term, by the expiration of that term,(b) if entered into for a single adventure or undertaking, by the termination of that adventure or undertaking, or(c) if entered into for an undefined time, by any partner giving notice to the other or others of his or her intention to dissolve the partnership.(2) In a case referred to in subsection (1) (c) the partnership is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice.Settlement of accounts on dissolution
47 Subject to any agreement, in settling accounts between the partners after a dissolution of partnership, the following rules must be observed:(a) losses, including losses and deficiencies of capital, must be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share profits;(b) the assets of the firm, including the sums, if any, contributed by the partners to make up losses or deficiencies of capital, must be applied in the following manner and order:(i) in paying the debts and liabilities of the firm to persons who are not partners;(ii) in paying to each partner rateably what is due from the firm to that partner for advances as distinguished from capital;(iii) in paying to each partner rateably what is due from the firm to that partner in respect of capital;(iv) the ultimate residue, if any, must be divided among the partners in the proportion in which profits are divisible.Power of court to decree dissolution in certain cases
38 (1) On application by a partner, the court may decree a dissolution of the partnership in any of the following cases:(a) if a partner is declared under the Patients Property Act to be incapable of managing his or her affairs or if it is shown that a partner is, because of mental infirmity, incapable of discharging his or her duties as a partner;(b) when a partner, other than the partner suing, becomes in any other way permanently incapable of performing his or her part of the partnership contract;(c) when a partner, other than the partner suing, has been guilty of conduct that, in the opinion of the court, regard being had to the nature of the business, is calculated to affect prejudicially the carrying on of the business;(d) when a partner, other than the partner suing, wilfully or persistently commits a breach of the partnership agreement or otherwise so conducts himself or herself in matters relating to the partnership business that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with him or her;(e) when the business of the partnership can only be carried on at a loss;(f) whenever circumstances have arisen that, in the opinion of the court, render it just and equitable that the partnership be dissolved.(2) If there are 3 or more partners, the partnership may be dissolved or may be dissolved as between the partner whose condition or conduct gave rise to the application and the remaining partners.

But none of that talks about what happens with an asset that is not a monetary asset and that is the concern here.

But really a lawyer in BC should be addressing this.

From my experience though it is not uncommon for one partner to buy out the other by being given a right of first refusal if the business is sold.

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