Recently, in Corrales v. Corrales, the California Court of Appeals sent a partnership dispute case back to the trial court because the parties to the dispute - the two partners - believed that one person can own a partnership. Under the California Revised Uniform Partnership Act (RUPA), partnerships must have at least two people. Therefore, when one partner withdraws from a two-person partnership, the partnership dissolves by law.

The court's ruling certainly reflects a common sense definition of a "partnership." However, it also begs the question: what options are available when a partnership dispute threatens the viability of a business? Partnership dissolution and dissociation are two options to discuss with a partnership disputes attorney.

Dissociation

Before 1996, when one partner left a partnership, the partnership dissolved. The dissolution happened automatically unless the partnership agreement stated otherwise.

Now, when one partner wishes to withdraw from a partnership of three or more people, the RUPA allows for dissociation. During dissociation, the dissociated partner sells his or her interest in the partnership to the partnership. The remaining partners are able to keep the partnership going without much legal consequence.

Partnership Dissolution

Under the RUPA, partnership dissolution occurs when at least half of the partners desire to dissolve the partnership. This number includes those who had dissociated from the partnership in the past 90 days and who had wanted the partnership to dissolve.

During a dissolution, creditors of the partnership are paid and business assets are split between the partners.

Partnership dissolution and dissociation are complex legal proceedings. If you are involved in a partnership dispute, do not hesitate to contact a San Diego partnership disputes attorney to learn about your options.

Source: California Court of Appeals, Rudy Corrales et al. v. Richard Corrales