One of the most common types of business litigation lawsuits in California is where one partner in a partnership sues another partner for failing to fulfill his obligations under the partnership agreement. Such a dispute might arise over rights to share in profits, who gets to exercise control over the partnership’s profits, the alleged failure of one partner to provide services or goods to the partnership, or any other right or obligation related to the partnership agreement. For some partners, the threat of such a lawsuit can come as an enormous surprise, especially where there was: 1) no written partnership agreement between the parties, and/or 2) one “partner” never believed that they had a legally valid partnership. Under California law, however, partnership agreements can indeed exist where no written agreement and/or formal arrangement of a partnership were ever established, meaning such a lawsuit can go forward.
California Can Find There is a Partnership Without an Express Agreement
California’s Corporations Code makes clear that partnerships can and will be validly established in the eyes of the state courts even without a written agreement or intention to form a partnership where there is, “the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.”
In determining whether two or more persons have indeed formed a partnership by carrying on as co-owners of a business for profit, courts will not presume that jointly held property means a partnership exists, but they will presume that a person who “receives a share of the profits of the business” is a partner in the business, unless those payments are made for another particular purpose such as rent or interest payments on a loan.
Determining What Is In the Partnership Agreement
If the first step in a partnership dispute is determining whether a partnership actually existed, the next big step is to determine what the partners have agreed to when there is no formal partnership agreement. In such cases, the court is going to hear evidence on what oral assertions were made between the partners regarding their respective rights and obligations in the partnership. The court may also look at any other number of documents to assess the partnership structure, for example agreements with other parties, accounting records, banking records, and so on.
Because determining what the rights and obligations between the parties can have a huge financial implication for both partners as they divide up who is responsible for partnership debts and who has the right to receive partnership profits, it is important to work with an experienced partnership dispute attorney in such cases to present your best case and defend your property interests.
Contact the Partnership Dispute Attorneys at Wagenseller Law Firm
At Wagenseller Law Firm in downtown Los Angeles, we provide full legal services to individuals and businesses in business and real estate litigation matters. Contact the Wagenseller Law Firm today to schedule a consultation to discuss your partnership dispute matter.