Protecting Both Business Finances And Futures

What should I know about partner expulsion in California?

On Behalf of | Feb 9, 2023 | Business Litigation |

When California partnerships are formed, the objective is for the business to function smoothly and everyone involved to work in the interests of achieving profit and success. However, there are often obstacles that can arise.

If a partner has behaved in a way that compels the other partners to seek ways to pursue an expulsion, it is not a simple matter of just telling them to leave, addressing financial considerations and moving on. There are legal steps that must be taken. For partners who want to expel another partner or from the perspective of the partner who is facing expulsion, it is imperative to understand the law and to be protected.

How does the law address a potential partner expulsion?

To expel a partner, there must be a unanimous vote in agreement by the other partners. This can happen if it is a legal violation for the partnership to continue with that partner. The expulsion can also take place if most or all of the partner’s transferrable interest—apart from that which is there for security purposes—has been transferred.

An expulsion can be completed if the partnership informs the corporate partner of the decision to expel due to a decision to dissolve the partnership, a revoked charter or a suspension of the right to conduct business. Winding up the partnership, limited partnership or a limited liability company will also expel a partner.

A judicial determination can result in an expulsion for one of the following reasons: the partner must have negatively impacted the business by engaging in wrongful conduct; they committed a material breach of the partnership agreement or a duty they owed the partnership and did so willfully or persistently or they behaved in a way that makes it impractical to continue the business and retain them as a partner.

Business issues in which a partner might be expelled generally require legal assistance

It can be difficult to handle a partnership dispute and go forward with expulsion, but there are some cases in which it is necessary. Issues that arise in partnerships include breach of contract, fraud, financial wrongdoing and more.

The partner who is facing expulsion should also make sure to have professional help when trying to find a workable solution to exit the partnership or to fight the attempted expulsion. For help with business litigation of any kind, it is essential to call experienced people who know the ins and outs of these types of cases.



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