One May Be The Loneliest Number But Its Not A Partnership

Yesterday, a California Court of Appeal concluded that the idea of a one person partnership under the Revised Uniform Partnership Act has as much reality as a number whose square is a negative number. Corrales v. Corrales involved two brothers who used a “stationary-store form” to form a partnership. As the trial court observed, the partners then proceeded to ignore the agreement. But that’s not the point of this case or this post.

After a few years, one brother sent the other a “notice of dissociation” and litigation ensued. Under Corporations Code Section 16701, a partnership must buy out a dissociated partner’s interest. At trial, a big issue was the valuation of the partnership business pursuant to Section 16701. The Court of Appeal, however, found that this gargantuan issue was not even lilliputian. In fact, it was non-existent. Rather than decide the seemingly central question of value, the Court found that when the brother dissociated from the partnership, there was no longer any partnership because a partnership must consist of at least two persons (Corporations Code Section 16101(9)).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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