Partnership Laws

A partnership is a good thing to come by in the business industry. When one enters into a partnership, they should be able to trust that other person, or maybe other people, to help handle the responsibilities which would normally be all their own. A partnership is defined as a joint interest, or, in law terms, an association of people joined in business. When dealing with partnerships, one must be very careful to pick the right people, otherwise many difficulties may arise. There are also very many questions that need to be answered about partnerships and how to deal with them. Here are some questions that have been answered by Experts about partnerships that may clear up some confusion.

If the majority of a partnership wishes to sell and there is no partnership agreement, can the majority decide to sell for the whole partnership, and are there certain statutes for this?

There are certain statutes in different states that have “rules” that can be overlooked by changing the partnership agreement and having it say something else. If there is an absence of a written partnership agreement, any sort of contract or agreement signed afterwards by all members of the partnership would be considered a new agreement. This new agreement would be able to be enforced by both partnership and contract laws. However, if not all members consent to sell the entire partnership and there is disagreement on the matter, then this “disagreement” could have the ability to end the partnership. When dealing with partnership law, it is important to remember that when even only one member from the partnership wishes to get out, the partnership automatically ends.

If a partnership consists of three partners and the contract states that any two will have majority, is there anything the third member can do if this member does not agree on a certain decision?

If everything stated in the partnership agreement are being adhered to accordingly, then there is not much the third partner can do to when it comes to making a certain decision unless the decision, investment, or deal requires all three partners to consent and sign. It is possible that when making a certain decision, a third party member may request or demand all three partners to consent and sign. If they are shown the partnership agreement, they may settle for less than all three depending on the third party’s wants and needs. As a last resort, the third partner may choose to sue to judicially end the partnership, in which case appointed authorities will supervise the closing down of the business. However, the other party members may decide to make another agreement to avoid dissolving the partnership.

What steps need to be taken if one has an informal partnership with only one percent interest in the business and the other member has agreed to buy out the partnership?

What would normally happen in a situation like this is that the buyer would pay the former partner the one percent of the current value assessed so the investment in the business would be considered returned. If the accounting and financial statements of the business do not show a current value, a third party appraiser may be needed to evaluate the business and update the value unless the former partner and the buyer have agreed on a certain amount to be paid. The only possible issue with this certain situation would be that unless the buyer agrees to protect their former partner from financial activities related to the business, that partner may not be protected against liability or tax issues. For example, if the IRS is looking back at the business for any tax liabilities, they will look back at both owners of the business at the time.

If one starts a 50/50 business partnership with a personal friend, what rights do spouses have to the money and/or business in the state of a divorce?

A spouse would usually get 50 percent of their spouse’s investments, so the spouse would get 25 percent of the business. In many states, any investments or money made during the time of the marriage would be considered community property, or property the husband and wife own together.

If someone is in a partnership for a company that they do not own, can that partner be held accountable for any liabilities or pulled into any lawsuits formed?

Even if one does not own the company, that person is still considered to be a partner in the business. Being a partner might not automatically make you liable, but it certainly can pull you into and make you responsible for any liabilities or lawsuits.

No matter what kind of partnership you have, whether it is in writing or if it is informal, there are always questions that will arise. Partners wanting out of a partnership will always be advised to go about it legally and carefully so they are not sought after for legal issues. Partnerships can be very profitable and comforting, but if they are not dealt with correctly they can land a person in a lot of financial trouble. If one ever has any questions about partnerships or any other topic, it is always wise to ask the Experts.