California’s Revised Uniform Partnership Act has, since its adoption in 1996, permitted a partner to ‘dissociate’ himself or herself from the partnership – that is, to withdraw without causing the automatic dissolution of the partnership, which would otherwise occur (unless the partnership agreement provided for continuance on the withdrawal, expulsion or death of a partner).
Rudy Corrales and his brother Richard formed a partnership in 1989, from which Richard ‘dissociated’ himself in 2006. In the resulting lawsuit over partnership assets, a major issue was the valuation of the business for buy-out purposes under the state corporations code.
That’s where the trial judge went wrong, said the California appeal court: Corrales v Corrales (Cal. App. 4th Dist., 10 August 2011) [Link available here]. There was no business to value after 2006, the partnership having been automatically dissolved by Richard’s withdrawal. Had two or more partners been left, the partnership would have continued; as for a one-person partnership, ‘no such animal exists’ – not even in California.