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Can you expel your business partner?

Apr 25, 2023 | Breach of Contract Claims

Having a business partner comes with significant benefits, from increased capital and borrowing capacity to accessing top-notch talent and support. Business partners should have a binding agreement that covers everything regarding the partnership, including expulsion. 

Here is what you need to know about expelling your partner if that ever comes to pass.

Refer to the partnership contract

If your partner violates the partnership agreement, it will be best to reread it to confirm if their action creates grounds for expulsion. Thus, your expulsion clauses should be clear to avoid misunderstandings. 

For instance, if your clause states a partner may be expelled for criminal activity, you should provide the exact definition of this ground and a few examples. This way, when the time comes, you and your partner may not have disagreements about technicalities. 

After confirming your partner has made a mistake whose consequence is expulsion, you should follow the procedures discussed in the clause, lest you also breach the contract. If you need to serve them with a notice or meet them physically to pass the news, do so. If your agreement requires you to dissolve the partnership before expelling a partner, do so.

What if you don’t have an agreement/expulsion clause?

Perhaps the partnership was formed naturally because you had the same goals but didn’t make it formal with a written contract or your agreement lacks an expulsion clause, you need to be more careful. You should follow the California partnership law to guide you. Additionally, you can go to court to obtain an order to force your partner out.

Expelling a business partner can be complicated. It may be best to get legal guidance for more information on approaching this matter.