The Legal Trap That Could Destroy Two-Partner Businesses in California
Most two-partner businesses assume that with the right agreement in place, a buyout will be simple.
But here’s the truth: California law doesn’t treat two-partner businesses the same way it treats larger partnerships. And if you’re not prepared, that difference could cost you everything.
I’ve had clients come to me thinking they had a clear exit path—only to find out that their buyout agreement was legally unenforceable. Why?
Because in a two-person partnership, when one partner leaves, the partnership is automatically dissolved under California law. That means:
Buyout provisions may no longer apply
You could be forced into full business dissolution
You may have to liquidate assets, notify creditors, and start over from scratch
This legal loophole doesn’t exist in partnerships with three or more people. But for two-person companies, your entire business continuity plan depends on how your structure is set up from the beginning.
In this LinkedIn post, I share how to avoid this trap and what steps you can take now to protect your business from a surprise dissolution:
Watch the full carousel here:
If you’re in a two-partner business, now is the time to get your structure reviewed. Don’t wait until a disagreement turns into a legal crisis.
Let’s make sure you’re protected: www.lawpla.com
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