Dissociated Partner May Remain Liable

Dissociated Partners May Remain Liable

Dissociated Partner May Remain Liable

According to Cal. Corp. Code § 16603(1), when a general partner dissociates, they lose their right to participate in any conduct or management of the partnership business. Subdivision (a) of Section 16703 states that a dissociated partner is not liable for any partnership obligation incurred after dissociation. However, there is an exception:

If the dissociated partner is not associated with limited liability partnerships or foreign limited liability partnerships, a dissociated partner is liable as a partner for two years after the dissociation if these three things apply in the  transaction:

  • The other party believes the disassociated party was then an actual partner
  • The other party was not notified of the partner’s dissociated
  • The other party did not have knowledge of either subdivision (e) of Section 16303 or notice under subdivision (c) of Section 16704.

Section 16303(e) is in regards to Statements of Denial and Section 16704(c) provides that non-partners require notice of the dissociation 90 days after a Statement of Dissociation is filed.

 

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