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Partnership: Elements and Expulsion Issues

By Edited Oct 20, 2015 0 0

Most businesses cannot be controlled by a single entity. Sometimes, it's better to have someone to share the responsibilities and expenses that owning a business entails, especially once it becomes huge and successful. Partnership in a business is very common, and in order to finalize a partnership, the following elements must be present.

  • Valid agreement – The agreement or contract may be formal, informal or implied.

  • A business to carry on – A business that covers every trade, occupation or profession should have some degree of continuity.

  • Commonality of purpose – The parties that will enter the partnership should have a common goal for the business.

  • View of profit – This excludes non-profit organizations.

Laws like the California Corporations Code establish that the people in a partnership have to enforce the conditions of the agreement. They have the duty to promote their business and are not allowed to perform unjust actions for personal gain.

Just like other normal partnerships, a partnership made for business may eventually fall apart too. That is likely to happen if a breach of partnership is proven to have occurred. Sometimes, the business is dissolved in order to dissolve the partnership as well.

However, parties in a partnership agreement have the right to expel their partner if their agreement addressed such right. The agreement should put in detail the circumstances that are grounds for the expulsion, the process of coming up with the decision to expel, and the amount of share that the expelled can receive. These reasons for expulsion are considered unlawful.

  • Bad Faith Expulsion – When a partner to be expelled shows proof that his co-partners have taken advantage and used a particular clause on the agreement for personal gain, then his expulsion is illegal. The expulsion is done in "bad faith."

  • Unlawful Expulsion – If the reason for expulsion is the sex, gender preference, disability, race, religion, age, or nationality of the partner, the expulsion is considered discriminatory and illegal.

Instead of expelling partners, the partnership may get dissolved if one or more partners decide to cease their association with the others. But it should be done with caution in order to prevent wrongful dissolution, or when a person dissolves the partnership before the end of term agreed upon in the contract. Lawsuits may be filed in the event of a breach of partnership or a violation of the Revised Uniform Partnership Act.



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