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The grounds for expulsion of a business partner in Texas

On Behalf of | Jan 17, 2024 | Partnership Agreements And Disputes |

The departure of a business partner often signals the end of an era. Whether it was a fruitful collaboration or a challenging journey, the reality is that every partnership has the potential to experience this transition. Sometimes, the separation is amicable. At other times, it might be full of tension and disagreements.

In Texas, the law provides several grounds on which a business partner may be expelled from the partnership. While the hope is always for a peaceful resolution, it’s essential to recognize that complications can happen.

Agreement-based expulsion

If the partnership agreement includes specific provisions for expulsion and those conditions are met, the other partners or the partnership itself can ask the partner to leave the company.

Expulsion by majority vote

If most other partners vote for a partner’s expulsion, they can expel the partner. This could happen for several reasons, such as if it becomes illegal to continue conducting business with that partner or if the partner fails to correct certain issues related to the business within a 90-day notice period. In these cases, the other partners can vote to ask the partner to leave the company.

Expulsion by judicial decree

The partnership or other partners can ask a partner to leave if they can obtain a court order for their expulsion. This could happen due to the following reasons:

  • The partner engages in wrongful conduct that significantly and negatively impacts the business.
  • The partner consistently violates the partnership agreement or fails to fulfill their duties to the partnership or the other partners.
  • The partner behaves in a way that makes it impractical to continue the business in partnership with them.

In such situations, seeking an official court order can be necessary to legally enforce a partner’s removal.

Legal considerations

A partnership agreement likely has specific procedures in place for a partner’s departure. All other partners must review this document carefully. They can also consider consulting with a lawyer to ensure the business follows the correct procedures and protects its interests.

It’s important to prepare and take the necessary steps to protect the company, its assets and, most importantly, the interests of its remaining partners. So, navigating such situations with legal clarity allows for confidence in the process. This, in turn, helps protect the interests of the partnership and its remaining members.