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If business partnership entered into a one year lease, are we both personally liable even if partner wants out of the business

Yuma, AZ |

Hi I started a partnership with a friend in Sept. of this year. We sign a one year lease. a few days ago she gave me a letter saying she does not want to be in the business any more. Is she liable for half the rent for the one year lease. I find this so stressing because know I am having a hard time opening the business on my own.

I started doing all the expenses because we agreed that she was to pay for merchandise and I will pay the rest if needed. Know I dont know what to do. Please advice ASAP

Attorney Answers 3


Based on the facts presented, it is not entirely clear what expenses each of you were responsible for satisfying, or under what circumstances that arrangement was made. Nonetheless, as a general proposition of law, you are entitled to recover the expenses she agreed to satisfy. Certainly, if you have a written agreement, that should help ascertain the rights and interests of the parties. I am not sure how much your relationship with your friend has deteriorated. But before taking this matter along a legal route, I would encourage you to try and reach a firm, written accommodation with your friend first, and see what you can salvage from the present situation that is acceptable to both parties.

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I will assume you are located in Arizona and that there is no partnership agreement in place at this time which addresses the issue of partner withdrawal.

Arizona Revised Statutes Section 29-1012.A defines a general partnership as "the association of two or more persons to carry on as co-owners a business for profit . . . whether or not the persons intend to form a partnership" unless the business is a corporation, a limited liability company or formed under some other Arizona statute. Arizona general partnerships may exist without a written agreement of any kind signed by the partners. However, anybody who intends to form a general partnership or who has an existing general partnership should have the partners adopt a written general partnership agreement that specifies the rights and obligations of all the partners.

All general partners of a general partnership have unlimited personal liability for all obligations and liabilities of the general partnership. Assuming a legal obligation is incurred in the name of the partnership, if a general partner signs a contract on behalf of the partnership that obligates the partnership to pay $10,000, all the general partners may be personally liable to satisfy the obligation absent a written agreement otherwise.

I would suggest that if your partner no longer wishes to be a partner that an agreement be reached to resolve the matter. Because all general partners of an Arizona general partnership are personally liable for the obligations and liabilities of the general partnership, your partner needs to realize that she is obligated as a general partner and come to an agreement with you as quickly as possible. As a suggestion going forward, a general partnership should never be used to operate a business, to hold assets or for any other purpose in Arizona unless there are special circumstances that dictate using a general partnership such as an investment partnership. I would suggest a limited liability company or an S corporation as an appropriate legal entity for you to protect your personal assets( assuming you do not personally guarantee any corporate obligations). While the right legal entity will not guarantee you success going forward, it will help you sleep better at night.

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you got some decent advice from the first 2 answers. here is a simple answer -- schedule an appointment with an experienced attorney to advise you of your rights and obligations. make sure you bring all written agreements that you and your partner are a party to so your attorney can advise your appropriately. remember, whether your partner is liable to you may be a different issue/question as to whether he or she is liable under the lease. i'd need to know who signed the lease -- you and your partner as individuals? as guarantors?

McCain & Bursh, Attorneys At Law.

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