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How to Legally Expel a Business Partner

By Edited Feb 10, 2014 0 0

If you have a partner in business and one of you backs out, how will you divide the shares? Can you sue your partner for not completing the terms and conditions of the partnership agreement? What are the grounds on which you can expel your partner?

These are the common questions involving corporate partnership.

The partnership agreement is a legal and binding contract that makes involved parties liable for the fulfillment of its terms and conditions. Disputes often arise when one or more of the terms are violated or the partner failed to function accordingly. You can expel your partner under legal grounds. Some of these are:

1. Bad Faith Expulsion- You can expel your partner, if he or she has violated one or more of the terms of agreement. You can also have a valid basis if he/she has taken advantage, and the action was done in bad faith.

2. Illegal Expulsion- When your partner commits acts of discrimination on the basis of age, color, religion, gender, or race; you may file a lawsuit and have your partner expelled.

3. At Will Partnership- This type of partnership does not hold any or the party liable for breach of contract. The partnership can be terminated anytime upon the discretion of both parties.

4. After the expulsion- If the partnership agreement has stipulations on the basis and procedure for expulsion, it will be binding. The company can resume its operations even if a partner is expelled.

5. Payment for the partner after expulsion- The expelled partner should be given a fair amount of his share. The price may be pre-determined in the partnership agreement. This set up will transpire if the business will continue with its operations.

6. Dissolution- If one of the partners decides to dissolve the company as a way to expel the other partner, there should be a proportion share of profits among partners. Assets are to be liquidated and distributed to partners. The amount can also be used to pay for the company's debts.

On the other hand, unless the company is dissolved; the departing partner still has decision-making authority.

7. Unlawful Dissolution- If the terms of agreement in the contract stipulate a specific period of time for completing the deal, it will be binding. If one of the partners fails to fulfill responsibilities within the time required, a breach of contract lawsuit can be filed.

8. Failure to continue contract responsibilities- If one of the partners backs out from the deal without justifiable reason, the other partner can file a breach of contract lawsuit.

Consult a Corporate Business lawyer in Los Angeles to learn more on Breach of Partnership.


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