Q: I have a business partner. We are 50-50. It isn't a happy relationship. The business does fine, but I really want out. What are my options?
- B.L., Cypress
Answer: The partnership agreement, if in writing and signed, should have provisions on how you can go about transferring or selling your shares. There also would likely be provisions of how to address a dissolution, if that's what it comes to. Winding up the partnership's activities can be a bit daunting, so consultation with counsel is advisable. In California, under the Uniform Partnership Act, if there is no written agreement, your desire to separate could be viewed as a "dissociation." Your remaining partner would then be entitled to buy out your portion at a figure to be determined either by negotiation or appraisal.
The Uniform Partnership Act in California can be found at California Corporations Code Section 16100 through 16962.
Q: I am part of a limited liability company (LLC) set up under California law. I would like to move on by selling my membership interest. There are two other members. What do I have to do?
- K.J., Wilmington
A: In California, LLCs are required to have an operating agreement, which should set forth the procedures if you want to sell your interest. Often the other members are entitled to a right of first refusal (which may be based on a price you otherwise would sell your interest to a third party). Typically, your interest in an LLC is not something you can just do with as you please. Also, depending upon your percentage membership interest (e.g., you own at least 50 percent of the LLC), your decision to sell, should no one buy, may give you the ability to force the LLC to dissolve.
Q: I am concerned my partner in a joint venture is doing some things behind my back. He seems to be either setting up another company, or moonlighting in a way that competes with our business. Is he at liberty to do so?
- R.W., Manhattan Beach
A: Partners and joint venturers, by law, have fiduciary duties to each other. This means a heightened obligation of loyalty, including not to conceal information that is material to the partnership (or joint venture). It also signifies that your joint venture colleague should not compete with your enterprise, nor take actions that involve self-dealing, or which conflict with his duty to do what is in the best interests of the joint venture. Breach of fiduciary duty, that causes damages, is actionable in civil court, and could even be a basis to seek punitive damages.
Ron Sokol is a Manhattan Beach attorney with more than 30 years of experience. His column appears on Wednesdays. Email questions and comments to him at RonSEsq@aol.com or write to him at Ask The Lawyer, Daily Breeze, 21250 Hawthorne Blvd., Suite 170, Torrance, CA 90503. This column is a summary of the law and not a substitute for legal consultation on any particular case.