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My business Partner with the financial investment want out of the business. How do I respond to his unreasonable demands?

Seattle, WA |

He has put in most of the funds to start up the business. He is wanting out over personal differences/ different values. I am happy to not have him and his friend as partners any more but I am on the cusp of making money with this business and he is asking for EVERYTHING back. All machinery, equipment, and financial contributions. This business is about to make money but I can't do it without the equipment and I have no means to pay him back yet. He states he will send someone to pick up all the company equipment. The business has made commitments and I now have people counting on me to deliver product.

We signed a partnership agreement that stated "money invested by the exiting partner will be paid back either in lump sum or on a fixed term with interest."

Does he have legal grounds?

Attorney Answers 3


  1. without actually reading the whole agreement a definitive answer is impossible but having drafted too partnership agreements to count, there is usually a clause that precedes the above that says something like "a partner cannot demand property" and there should be some sort of buyout formula included.

    However, there are other parts of the Partnership Agreement or, if not stated, default to your state's laws, that may allow them (or you) to do other things to can the business.

    I suggest you see an attorney before its to late as you may have to take immediate steps to get things stopped before all is lost and your only recourse is to sue him for damages (that, if the business is not profitable) that are speculative and may not come close to fair compensation for the losses.

    Legal Disclaimer: Richard W. Beck is licensed to practice law in Colorado. His answers are for general information and no Answer or Comment shall be deemed to create an attorney-client relationship or create any right of confidentiality. The reader should never assume that this information applies to his or her specific situation or constitutes legal advice. Therefore, please consult an appropriate attorney in your jurisdiction and who is familiar with your specific facts and all of the circumstances as there is likely a time limit related to the question that could expire at any time and you would lose any rights you had.IRS CIRCULAR 230 DISCLOSURE: As required by U.S. Treasury Regulations governing tax practice, you are hereby advised that written advice contained herein (if any) was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.


  2. Because you signed a partnership agreement, the terms of the partnership agreement will control. A proper partnership agreement will specify the terms and procedures for dissociation and buyout. To the extent that the partnership does not address dissociation and buyout, the Uniform Partnership Act applies. You can view the Act by going to the following link: http://apps.leg.wa.gov/RCW/default.aspx?cite=25.05&full=true#25.05.015

    It would be best to have your attorney review your entire agreement to determine what you rights are.

    Legal disclaimer: The answer provided: A) is for informational purposes only, B) is not intended to constitute legal advice, C) should not be relied upon in lieu of consultation with an attorney, and, D) does not establish an attorney client relationship. The answer may be different if all of the facts were known.


  3. The answers so far have been good, but I would like to add one more thought. If this is truly a partnership (and not an LLC or corporation), all partners have certain obligations to the partnership and could share in liability personally if contracts aren't filled.

    With the others, I would encourage you to consult with an attorney quickly and allow the attorney to read the partnership agreement from beginning to end.

    Good luck/

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