How to Legally Remove a Business Partner in California
October 8, 2025
How to Legally Remove a Business Partner in California
Running a business with one or more partners can be rewarding—but when disagreements, misconduct, or mismanagement arise, removing a partner may become necessary to protect the company’s future. In California, the process of legally removing a business partner depends on the business structure, the partnership agreement, and the nature of the dispute.
1. Review the Partnership or Operating Agreement
The first step is to review your partnership agreement (for general or limited partnerships) or operating agreement (for LLCs). These documents often include provisions that outline how a partner can be removed, the required voting process, and the method of valuing and buying out their ownership interest. If the agreement specifies grounds for removal—such as breach of fiduciary duty or misconduct—those terms will guide your next steps.
2. Identify Legal Grounds for Removal
If the agreement doesn’t address partner removal, California law still provides options. You may remove a partner through:
- Voluntary Buyout: Negotiating a buyout of the partner’s interest.
- Judicial Dissolution: Asking a court to dissolve the partnership when conflicts make it impractical to continue business.
- Expulsion for Misconduct: If a partner engages in fraud, theft, or gross negligence, you may have legal grounds for expulsion under California’s Uniform Partnership Act or LLC law.
3. Follow Proper Procedures
Even if justified, removal must follow the correct process. Hold a formal meeting, vote according to your agreement or governing law, and document all decisions. This helps prevent claims of wrongful expulsion or breach of contract.
4. Handle the Buyout and Financial Settlement
Once the removal is approved, calculate the value of the departing partner’s interest. California courts expect transparency and fairness in financial settlements. The buyout can be paid in cash, installments, or other agreed-upon terms.
5. Update Legal and Financial Records
Finally, update your business filings with the California Secretary of State, revise internal ownership records, and notify banks, clients, and vendors of the change. Keeping accurate records ensures compliance and protects your business from liability.
Get Legal Help from Daryl Reese Law Group
Removing a business partner is a sensitive process with serious financial and legal consequences. At Daryl Reese Law Group, we assist California business owners with partnership disputes, buyouts, and restructuring to protect their interests and keep their operations moving forward.
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