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Partnership

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GFS357

Junior Member
What is the name of your state (only U.S. law)? TN
I started a small business three months ago with three friends, now one person wants out and is advertising his 25% ownership for sale. We dont have the capital to buy him out since we are running in the red, can we block or resrict the sale?
 


Antigone*

Senior Member
What is the name of your state (only U.S. law)? TN
I started a small business three months ago with three friends, now one person wants out and is advertising his 25% ownership for sale. We dont have the capital to buy him out since we are running in the red, can we block or resrict the sale?
Is there anything in your operating agreement that would preclude that?
 

tranquility

Senior Member
If withdrawal is not contemplated in the partnership agreement, the removal of one partner can be considered a dissolution of the partnership according to the most usual modification of the Uniform Partnership Act. (I'd have to look it up, but I believe the unmodified UPA required the dissolution of a partnership on the withdrawal of a partner no matter the agreement.) The courts hate legal disagreements between partners and are very reluctant to get involved in partnership matters except in the course of a suit for final accounting on dissolution as judges don't like to settle one set of problems without taking care of them all. There are exceptions, of course, but partners are very much encouraged to settle things among themselves.

So, he cannot "sell" his part of the partnership without your agreement or under the terms of your partnership agreement. However, his withdrawal will probably cause the dissolution of the partnership and you have no right to stop him and you have to wind up *that* parnership even though you may immediately start another one with the remaining partners.
 

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