General Partnership Agreement (California)

CALIFORNIA GENERAL PARTNERSHIP AGREEMENT

Formed Under the California Uniform Partnership Act of 1994 (CUPA / RUPA)

CALIFORNIA DRAFTING NOTES

California's partnership statute is the Uniform Partnership Act of 1994 ("CUPA"), codified at Cal. Corp. Code §§ 16100–16962. CUPA is California's adoption of the Revised Uniform Partnership Act (RUPA). It took effect January 1, 1997, and replaced the former Uniform Partnership Act. Key CUPA features that differ from older common-law partnership rules:

• Entity theory. A CUPA partnership is a legal entity distinct from its partners (§ 16201).
• Joint and several liability. Partners are jointly and severally liable for all partnership obligations (§ 16306), unlike the former joint-only liability.
• Dissociation without dissolution. Under §§ 16601–16705, a partner may dissociate without triggering dissolution; the partnership buys out the dissociated partner's interest at "fair value" under § 16701.
• Statement of Partnership Authority. Partners may file Form GP-1 with the California Secretary of State under § 16303 to give constructive notice of authority or limits on authority.
• Mandatory fiduciary duties. Under § 16404, partners owe duties of loyalty, care, and good faith; under § 16103(b), these may be modified only within narrow limits and may not be eliminated.

California partnerships are NOT subject to the $800 California LLC/corporation minimum franchise tax, but must file Form 565 annually with the California Franchise Tax Board and may owe the LP franchise tax if registered as a limited partnership.

1. PARTIES AND FORMATION

1.1 Parties. This General Partnership Agreement (this "Agreement") is entered into as of [__/__/____] (the "Effective Date") by and among the persons listed on Schedule A (each a "Partner" and collectively the "Partners").

1.2 Formation. The Partners hereby form a California general partnership under the California Uniform Partnership Act of 1994, Cal. Corp. Code §§ 16100–16962 ("CUPA"), by their association as co-owners to carry on a business for profit consistent with Corp. Code § 16202(a). The Partnership is a legal entity distinct from its Partners pursuant to § 16201.

1.3 Name. The partnership shall conduct business as "[________________________________]" (the "Partnership"). The Partnership shall, if required, file a Fictitious Business Name Statement in each California county where it conducts business under Cal. Bus. & Prof. Code §§ 17910–17930.

1.4 Principal Office. The principal office of the Partnership shall be at [________________________________], California [____].

1.5 Statement of Partnership Authority (Optional). The Partners may cause a Statement of Partnership Authority (Form GP-1) to be filed with the California Secretary of State pursuant to Cal. Corp. Code § 16303 to provide constructive notice of the authority or limits on authority of any Partner.

1.6 Purpose. The purpose of the Partnership is [________________________________] and any lawful activity related thereto.

1.7 Term. The Partnership shall commence on the Effective Date and continue at-will until dissolved pursuant to Article 10.

2. JOINT AND SEVERAL LIABILITY; DISCLOSURE

2.1 Partner Liability to Third Parties. The Partners acknowledge that under Cal. Corp. Code § 16306(a), all Partners are jointly and severally liable for all obligations of the Partnership unless otherwise agreed by a third-party claimant or provided by law. This joint and several liability cannot be waived as against third parties.

2.2 Contribution Among Partners. Notwithstanding § 16306, as among the Partners, each Partner shall contribute to Partnership losses and indemnify co-Partners in proportion to the Partner's Percentage Interest set forth on Schedule A, except for losses caused by a Partner's fraud, willful misconduct, or intentional violation of law.

2.3 No Limited-Liability Shield. The Partners acknowledge that a general partnership under CUPA does NOT provide limited liability, and that if they desire limited liability they must instead convert to (i) a California Limited Liability Partnership (LLP) under Cal. Corp. Code § 16951 et seq. (which is available only for licensed professionals — lawyers, accountants, architects, engineers, and land surveyors), (ii) a California Limited Liability Company (LLC) under Corp. Code § 17701.01 et seq., or (iii) a California corporation under Corp. Code § 100 et seq.

3. CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS

3.1 Initial Contributions. Each Partner shall contribute the cash, property, or services set forth opposite that Partner's name on Schedule A. Property contributions shall be valued at their fair market value as of the date of contribution and consistent with Cal. Corp. Code § 16401(a).

3.2 No Interest on Capital. Consistent with Cal. Corp. Code § 16401(d), no Partner is entitled to interest on any Capital Contribution.

3.3 Additional Contributions. No Partner shall be required to make any additional Capital Contribution except as unanimously agreed in writing.

3.4 Capital Accounts. A separate capital account shall be maintained for each Partner consistent with Treas. Reg. § 1.704-1(b)(2)(iv) and Cal. Rev. & Tax. Code § 17851 (California conformity to IRC Subchapter K).

3.5 Loans by Partners. Loans from a Partner to the Partnership shall not be treated as Capital Contributions, and shall bear interest at an agreed rate not exceeding the California usury limits of Article XV, § 1 of the California Constitution.

4. MANAGEMENT AND VOTING

4.1 Equal Management Rights (§ 16401(f)). Unless this Agreement provides otherwise, each Partner has equal rights in the management and conduct of the Partnership business pursuant to Cal. Corp. Code § 16401(f).

4.2 Voting. Except as provided in Section 4.3, any decision may be made by a majority in Percentage Interest of the Partners.

4.3 Matters Requiring Unanimous Consent. Pursuant to Cal. Corp. Code § 16401(j), and as further agreed by the Partners, the following require unanimous written consent:

☐ (a) any act outside the ordinary course of Partnership business;
☐ (b) any amendment of this Agreement;
☐ (c) admission of a new Partner (consistent with the "pick your partner" rule of Corp. Code § 16401(i));
☐ (d) sale, transfer, or encumbrance of all or substantially all Partnership assets;
☐ (e) merger, conversion, or voluntary dissolution;
☐ (f) filing any bankruptcy or assignment for the benefit of creditors;
☐ (g) incurring debt exceeding $[____________];
☐ (h) commencement or settlement of litigation exceeding $[____________];
☐ (i) confession of judgment on behalf of the Partnership (Corp. Code § 16301(2)).

4.4 Meetings. Partners shall meet at least [monthly/quarterly] upon [____]-day written notice. A majority of Partners by Percentage Interest constitutes a quorum.

4.5 Managing Partner (Optional). ☐ The Partners may designate [________________________________] as Managing Partner to conduct day-to-day operations subject to limits set forth in Section 4.3. The Managing Partner's actual and apparent authority may be disclosed by filing a Statement of Partnership Authority (Form GP-1) under Corp. Code § 16303.

5. FIDUCIARY DUTIES UNDER CORP. CODE § 16404

5.1 Duty of Loyalty. Each Partner owes the Partnership and the other Partners a duty of loyalty under Cal. Corp. Code § 16404(b), which includes:

(a) accounting to the Partnership for any property, profit, or benefit derived from the conduct or winding up of Partnership business or from use of Partnership property, including appropriation of a partnership opportunity (§ 16404(b)(1));

(b) refraining from dealing with the Partnership as, or on behalf of, a party having an interest adverse to the Partnership (§ 16404(b)(2)); and

(c) refraining from competing with the Partnership in the conduct of Partnership business before its dissolution (§ 16404(b)(3)).

5.2 Duty of Care. Each Partner owes a duty of care limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law, consistent with Cal. Corp. Code § 16404(c).

5.3 Obligation of Good Faith and Fair Dealing. Each Partner shall discharge duties under this Agreement and exercise rights consistently with the obligation of good faith and fair dealing (Cal. Corp. Code § 16404(d)).

5.4 Limitations on Waiver (§ 16103(b)). The Partners acknowledge that this Agreement may not:

(i) eliminate the duty of loyalty (though it may identify specific categories of activities that do not violate the duty, if not manifestly unreasonable);
(ii) unreasonably reduce the duty of care;
(iii) eliminate the obligation of good faith and fair dealing (though it may prescribe standards by which performance is measured, if not manifestly unreasonable);
(iv) restrict rights of third parties under CUPA; or
(v) vary the provisions governing dissociation of a partner by judicial expulsion under § 16601(5).

6. PROFIT, LOSS, AND DISTRIBUTIONS

6.1 Allocations. Profits and losses shall be allocated to the Partners in proportion to their Percentage Interests, consistent with IRC § 704(b) substantial economic effect and Cal. Rev. & Tax. Code § 17851 (California conformity).

6.2 Distributions. Distributable cash shall be distributed in proportion to Percentage Interests at such times as determined by the Partners; provided, however, that no distribution may be made if, after giving effect, the Partnership would be unable to pay its debts as they become due in the ordinary course.

6.3 California Tax Filings. The Partnership shall timely file California Franchise Tax Board Form 565 (Partnership Return of Income), issue Schedule K-1s to each Partner, and ensure nonresident Partners' withholding under Cal. Rev. & Tax. Code § 18662 is properly handled.

7. CONFIDENTIALITY; CALIFORNIA TRADE SECRETS; NO NON-COMPETE

7.1 CUTSA Trade Secret Protection. The Partners acknowledge that Partnership information meeting the two-part test of Cal. Civ. Code § 3426.1(d) is protected under the California Uniform Trade Secrets Act, and that each Partner owes a duty of loyalty under § 16404(b) not to misappropriate Partnership trade secrets.

7.2 No Non-Compete During Partnership. During the term of the Partnership, Section 5.1(c) (duty of loyalty under § 16404(b)(3)) prohibits Partners from competing with the Partnership business. This prohibition terminates upon dissociation or dissolution, per statute.

7.3 No Post-Term Non-Compete Except § 16602 Exception. The parties acknowledge that Cal. Bus. & Prof. Code § 16600 voids post-term non-competes, but that § 16602 permits a partner who is retiring or ceasing to be associated with the partnership, upon dissolution of the partnership, to agree not to carry on a similar business within a specified geographic area. Any such covenant must be drawn narrowly within § 16602's exception.

7.4 Silenced No More Act Carve-Out. Nothing in this Agreement prevents any Partner or Partnership employee from disclosing factual information regarding unlawful acts in the workplace, including harassment, discrimination, or retaliation protected under Cal. Gov. Code § 12964.5 (SB 331) or from testifying regarding criminal conduct or sexual harassment pursuant to Cal. Civ. Code § 1670.11.

8. DISSOCIATION (Corp. Code §§ 16601–16705)

8.1 Events of Dissociation. A Partner is dissociated from the Partnership upon any event listed in Cal. Corp. Code § 16601, including:

(a) the Partner's express will to withdraw on written notice;
(b) an event agreed in this Agreement;
(c) expulsion under this Agreement or by unanimous vote of the other Partners for cause (§ 16601(4));
(d) judicial expulsion for wrongful conduct, material breach, or impracticability of continuing in partnership with the Partner (§ 16601(5));
(e) the Partner's bankruptcy (§ 16601(6));
(f) death, incapacity, or appointment of a guardian (§ 16601(7)).

8.2 Wrongful Dissociation. A dissociation is "wrongful" under Cal. Corp. Code § 16602 if it breaches an express provision of this Agreement or, for a partnership for a definite term or undertaking, occurs before expiration. A wrongfully dissociating Partner is liable to the Partnership and the other Partners for damages caused by the wrongful dissociation, consistent with § 16602(c).

8.3 Buyout at Fair Value (§ 16701). Following a dissociation that does not result in dissolution, the Partnership shall purchase the dissociated Partner's interest at "fair value" determined as of the date of dissociation, consistent with Cal. Corp. Code § 16701. Interest accrues from the date of dissociation at the rate set forth in § 16701(b).

8.4 Statement of Dissociation. Upon dissociation, the Partnership may file a Statement of Dissociation (Form GP-3) with the California Secretary of State under Cal. Corp. Code § 16704 to give third parties notice of the Partner's dissociation.

9. TRANSFERS OF PARTNERSHIP INTEREST

9.1 Economic Interest Transferable; Management Rights Not. Consistent with Cal. Corp. Code § 16503, a Partner may transfer only that Partner's "transferable interest" (right to receive distributions). Transfer does not automatically grant the transferee the rights to participate in management, vote, inspect records, or become a Partner.

9.2 Consent to Admission. Admission of a transferee as a Partner requires the unanimous written consent of the remaining Partners under Cal. Corp. Code § 16401(i).

9.3 Right of First Refusal. Before any proposed transfer of an economic interest to a non-Partner, the transferring Partner shall first offer the interest to the Partnership, then to the remaining Partners pro rata, on the same terms as the bona fide third-party offer.

10. DISSOLUTION AND WINDING UP

10.1 Events of Dissolution. The Partnership shall dissolve upon any event listed in Cal. Corp. Code § 16801, including:

(a) for an at-will partnership, a Partner's notice of express will to withdraw (§ 16801(1));
(b) for a partnership for a definite term or undertaking, the expiration or completion thereof (§ 16801(2));
(c) unanimous written consent of all Partners (§ 16801(2)(C));
(d) an event that makes it unlawful for the business to continue (§ 16801(4));
(e) judicial dissolution on application of a Partner for economic frustration, misconduct, or other grounds in § 16801(5).

10.2 Winding Up. Upon dissolution, the Partnership shall wind up its affairs under Cal. Corp. Code §§ 16802–16807, collect assets, pay creditors, and distribute any remainder to Partners in accordance with positive capital accounts.

10.3 Priority of Distribution (§ 16807). Partnership assets shall be applied in the following order:

(i) to creditors other than Partners;
(ii) to Partners for liabilities other than capital and profits;
(iii) to Partners for capital contributions;
(iv) to Partners in respect of profits;
all consistent with § 16807.

10.4 Statement of Dissolution. The Partnership shall file a Statement of Dissolution (Form GP-4) with the California Secretary of State under Corp. Code § 16805.

10.5 Final Tax Returns. The Partnership shall file a final Form 565 with the California Franchise Tax Board and issue final Schedule K-1s to each Partner.

11. DISPUTE RESOLUTION

11.1 Governing Law. This Agreement shall be governed by the laws of the State of California, including CUPA, without regard to conflict-of-laws principles.

11.2 Forum. The Superior Court of California in and for the County of [________________________________] shall have exclusive jurisdiction over all disputes, except that any Partner may seek judicial dissolution or expulsion in any California court with appropriate jurisdiction under Cal. Corp. Code § 16601(5) or § 16801(5).

11.3 Arbitration (Optional). ☐ At the election of any Partner, disputes may be referred to binding arbitration under the California Arbitration Act, Cal. Code Civ. Proc. §§ 1280–1294.4, administered by JAMS in [________________________________], California.

11.4 Statute of Limitations. Claims for breach of this written Agreement are subject to the four-year statute of limitations under Cal. Code Civ. Proc. § 337.

11.5 Attorneys' Fees. The prevailing Partner in any action to enforce this Agreement is entitled to recover reasonable attorneys' fees and costs under Cal. Civ. Code § 1717.

12. GENERAL PROVISIONS

12.1 Entire Agreement. This Agreement, together with Schedule A, constitutes the entire agreement among the Partners.

12.2 Amendment. Amendments require unanimous written consent.

12.3 Severability. Invalid or unenforceable provisions shall be reformed to the minimum extent necessary while the remainder remains in effect.

12.4 Notices. All notices shall be in writing and delivered in person, by overnight courier, or by certified mail at the addresses on Schedule A.

12.5 Electronic Signatures. Signatures delivered electronically pursuant to Cal. Civ. Code §§ 1633.1–1633.17 are binding originals.

13. SIGNATURES

The Partners execute this Agreement as of the Effective Date.

PARTNER 1:

[________________________________]

Signature: [________________________________]

Date: [__/__/____]

PARTNER 2:

[________________________________]

Signature: [________________________________]

Date: [__/__/____]

[Add signature blocks for additional Partners]

SCHEDULE A — Partners, Capital Contributions, and Percentage Interests

Sources and References

• California Uniform Partnership Act of 1994, Cal. Corp. Code §§ 16100–16962: https://leginfo.legislature.ca.gov/faces/codes_displayexpandedbranch.xhtml?tocCode=CORP&division=&title=2.&part=&chapter=5.
• Cal. Corp. Code § 16404 (fiduciary duties)
• Cal. Corp. Code § 16701 (buyout at fair value)
• Cal. Corp. Code § 16306 (joint and several liability)
• Cal. Bus. & Prof. Code § 16600 et seq.; § 16602 (partnership dissolution non-compete exception)
• Cal. Rev. & Tax. Code §§ 17851, 18662 (partnership tax; nonresident withholding)
• California Secretary of State Form GP-1 (Statement of Partnership Authority): https://www.sos.ca.gov/business-programs/business-entities/forms
• California Franchise Tax Board Form 565 (Partnership Return): https://www.ftb.ca.gov/
• Weiner v. Fleischman, 54 Cal. 3d 476 (1991)