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Partnership Dissolution

A general partnership typically exists when two or more persons carry on a business as co-owners for profit. Stuart v. Overland Medical Center, 510 S.W.2d 494, 497 (Mo. Ct. App. 1974). It is more specifically defined as a “a contract of two or more competent persons to place their money, effects, labor and skill, or some or all of them, in lawful commerce or business and to divide the profits and bear the loss in certain proportions.” Allison v. Dilsaver, 387 S.W.2d 206, 210 [1] (Mo.Ct. App.1965). The contract creating the partnership need not be written, but may be expressed orally or implied from the acts and conduct of the parties. Stein v. Jung, 492 S.W.2d 139, 143 [5] (Mo. Ct. App. 1973).

Unlike other business entities — e.g., corporation, limited liability companies, etc. — partnerships do not have a layer of creditor protection. In other words, the owners of a general partnership can generally be held personally liable for the liabilities of the partnership/business. A partnership is dissolved (and, absent certain steps to the contrary, eventually wound-up) when there is a “change in the relation of the partners ceasing to be associated in the carrying on.” Section 358.290, RSMo. In addition to any other events of dissolution as defined in a partnership agreement (if any), a partnership is almost always dissolved automatically when a partner dies or becomes incapacitated. Section 358.310, RSMo.

In more extreme and/or contentious circumstances, the Court can order a partnership dissolution after a lawsuit is filed. These situations include, without limitation, when a partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him; the business of the partnership can only be carried on at a loss; or “other circumstances render a dissolution equitable.” Section 358.320, RSMo.

Contact with questions about partnerships, partnership litigation and business litigation generally.