Articles Posted in Business Law

Underwood-Blog-Images-5-300x300General partnerships, and their “joint venture” cousins, are composed of partners seeking to make a profit in a business venture. But things don’t always work out. Often, a once promising endeavor breaks down due to mismanagement and miscommunication. In these situations, partners may feel the urge to get out with whatever equity they can. Usually, it isn’t that easy. 

The Revised Uniform Partnership Act allows for partners to dissociate from their partnerships whenever they want. Yet this withdrawal can sometimes cause serious damage, especially when the partner trying to leave was a major source of capital. For that reason, the California Corporations Code provides for penalties when the dissociation is “wrongful.” In the end, getting out of a partnership isn’t so much about doing it the “right” way as it is about avoiding the “wrong” way to dissociate.

What is a dissociation? 

Underwood-Blog-Images-1-3-300x300Yes. While joint ventures are a distinct type of business entity, they share many similarities with general partnerships in California. In fact, “the resemblance between a partnership and joint venture is so close that the rights as between adventurers are governed by practically the same rules that govern partners.” (Milton Kauffman, Inc. v. Superior Court (1949) 94 Cal.App.2d 8, 17.) That being said, there are some differences between the two. This post will address those differences and discuss the common issues that arise among them.  

What is a joint venture?

Under California law, a joint venture “exists where there is an agreement between the parties under which they have a community of interest, that is, a joint interest, in a common business undertaking…” (County of Riverside v. Loma Linda Univ. (1981) 118 Cal.App.3d 300, 313.) In essence, “a joint venture is an undertaking by two or more persons to carry out a single business enterprise for profit.” (Unruh-Haxton v. Regents of University of California (2008) 162 Cal.App.4th 343, 370.)

Underwood-Blog-Images-3-300x300 Shareholder derivative suits are lawsuits that allow and assist shareholders in bringing legal action against the board of directors or officers in a corporate entity for illegal action. 

Read on to find out about the relationship between shareholders and derivative suits.

What is a shareholder?

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At some point or another, it becomes necessary to have “the talk” and “define the relationship” within a business. While the thought of defining business roles may make some people nervous, not having a conversation is a source of even greater anxiety when the relationship involves an investment, business venture, or development project.

The problem, for many people, is that they don’t know what terms to use to define a business relationship, or how to structure it other than as a “50/50 partnership.” Many people are reluctant to structure it in any other way because of a concern of looking “greedy” or that another structure could cause the other party to back out of the deal, thereby removing the capital necessary to make the project happen.

If you find yourself in these situations, however, you should know that there are many alternatives to a “true partnership” that may work better for all of the parties involved.

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