Like any business entity, there is always the risk that a partnership will sour because one of the partners is not pulling his or her weight. For example, if it seems like you are doing all of the hard work or contributing all of the capital, you may wonder how you can dissolve the partnership or remove your partner from the business operations altogether. Two things are critical here: (i) the written partnership agreement; and (ii) Arizona’s Revised Uniform Partnership Act (RUPA) under A.R.S. § 29-1001, et seq., which governs limited liability partnerships and general partnerships.
Your first task should be to look at your partnership agreement to see how it governs the dissolution of the partnership, if at all. If that agreement has a procedure for dissolution of the partnership, then you will need to follow that procedure. In many cases, a majority vote by all partners is required to dissolve the partnership. However, if this is not an option, then there usually are alternatives, such as buying out the problematic partner or using a mediator to try and resolve the issues between partners.
In the event of a dispute over the partnership agreement, a lawsuit may include a claim for breach of the partnership agreement or a declaratory relief action to determine who owns what or who is entitled to what.
If the partnership agreement does not address dissolution, judicial dissolution is available under RUPA. Under A.R.S. § 29-1071(5), a partnership may be dissolved by judicial dissolution, on application by a partner, alleging that either:
(a) The economic purpose of the partnership is likely to be unreasonably frustrated;
(b) Another partner has engaged in conduct relating to the partnership business that makes is not reasonably practicable to carry on the business in partnership with that partner; or
(c) It is not otherwise reasonably practicable to carry on the partnership business in conformity with the partnership agreement.
Meanwhile, keep in mind that you will need to pay off all creditors before the partners receive any remaining assets or income of the partnership; you also should keep the tax implications of dissolving the business in mind and try to minimize your exposure to taxation as much as possible.
When you are involved in any type of business dispute, a skilled and experienced trial attorney is essential. Williams Mestaz, L.L.P., provides strong legal advocacy for employers involved in general business lawsuits. We are known for using our skills, experience, and cutting-edge technology to get great results, whether after trial or through a favorable settlement. Call us today at (602) 256-9400 and schedule an appointment to meet with us about your case.