Category: Legal

Legal

Dissolving a Business Partnership: Legal Reasons #55

Sanjay Sabarwal

Business partnerships, like all things, eventually come to an end. Some of these agreements simply reach a natural end with the conclusion of a particular deal or project. Others terminate upon the death of one of the partners or because of a dispute between the partners. Still others may end because the partners decide that it would be more advantageous for them to reform as a corporation or a limited liability company. If any of these circumstances apply to your situation, then it may be necessary to contact an attorney who has knowledge of dissolving a business partnership in California.

California law imposes conditions on dissolving business partnerships. Most of these conditions relate to making the dissolution publicly known so that concerned parties are informed about the change in circumstances. For instance, the California Revised Uniform Partnership Act specifies that legal notice of the dissolution must be advertised for at least 12 business days. Suppliers, creditors, and other concerned parties are also entitled to direct notice according to the law. It’s also essential for dissolution paperwork to be filed with the state and the Internal Revenue Service.

When partners become embroiled in a dispute, they’ll need an experienced attorney to closely interpret the terms of the original partnership agreement. This agreement should contain guidelines for terminating the partnership, and it’s only fair to ensure that all parties abide by these rules. On the other hand, if the agreement was not well drafted or does not contain sufficient explanations of how to dissolve the partnership, then it’s necessary to rely on the knowledge and experience of a California business attorney to help fill in the blanks based on California law and the intent of the partners. Frequently, lawyers can negotiate a dissolution that is equitable for all parties in accordance with the duties and responsibilities that are outlined in the original partnership agreement.

family law, Legal

What to Know About Spousal Support: Legal Reasons #54

Sanjay Sabarwal

How Long Will I Pay or Receive Spousal Support?

  • The length of spousal support is based on a reasonable transition period from married life to single and self-sufficient life.
  • The duration of support depends on in part on the length of the marriage. For marriages lasting less than ten years, the length of support is presumed to be equal to one-half of the time. For example, for a marriage that lasted eight years, the presumption is that the appropriate length of support is four years.
  • If you are married for longer than 10 years, the lesser earning spouse will receive support for as long as he or she needs to, as long as the other spouse is able to pay. There is no automatic termination date.

How Much Spousal Support Will be Ordered?

  • In California, the Superior Courts of Solano counties have adopted a spousal support guideline called the “Santa Clara Guideline” formula for use in temporary spousal support. Alameda and Contra Costa counties have adopted the “Alameda Guideline” formula. The guideline states that the paying spouse’s support be presumptively 40% of his or her net monthly income, reduced by one-half of the receiving spouse’s net monthly income. If child support is an issue, spousal support is calculated after child support is calculated.
  • Deciding permanent support is a much more detailed process with many factors to be considered. Family Code Section 4320 is the controlling statute that the court must consider in establishing permanent spousal support.
Legal

What to Consider in A Business Partnership: Legal Reasons #53

Sanjay Sabarwal

The biggest mistake made by partnerships is not having a well drafted partnership agreement. Although California law does not require a partnership to have a written agreement, a well written partnership agreement is strongly recommended because: (1) the default partnership rules typically do not mirror the partners’ intent; (2) a clearly written partnership agreement will set forth the essential terms and outline each partners rights and responsibilities, and (3) should a dispute arise between the partners, the partnership agreement will help to resolve a dispute that otherwise might cost tens of thousands of dollars to litigate.

Issues That Should Be Addressed In Every General Partnership Agreement.
At a very minimum, a written partnership agreement should set forth the purpose of the partnership business and exactly what is expected of each partner in terms of time, duties, and financial contributions. For example, will one partner be putting up the financial capital while the other partner puts in the work? If so, I guarantee there will be times when the person doing all of the work feels they are entitled to a bigger piece of the pie and times when the financial partner feels the other partner isn’t working hard enough. For this reason, it is extremely important that the partners have an understanding from the beginning as to what is expected from each partner. A written partnership agreement should also specify whether additional compensation will be paid to a partner who performs work at some particular time (e.g. after so many years, after the financial partner has recouped his or her investment, if additional work is performed, etc..) A written partnership agreement should also specify with great detail when and how the profits of the partnership will be split, and how losses will be divided and paid. Other terms that should be included in any written partnership agreement include:

  1. Term of the partnership.
  2. Purpose of the partnership and what outside competitive activities the partners may engage in.
  3. Initial capital contributions of the partners (including money, services, and property).
  4. Subsequent capital contributions. If the partnership needs additional capital, will the partners be obligated to make additional capital contributions?
  5. How the partnership profits and losses will be allocated among the partners, and when.
  6. How the partnership will be managed, including who will make the day-to-day decisions, who will be responsible for what duties, and what acts will require majority approval or unanimous consent.
  7. How much time each partner is expected to devote to the partnership business.
  8. Whether new partners can be added, and if so how.
  9. Under what circumstances a +partner can be expelled.
  10. How a partner can withdraw.
  11. Which partner(s) will have signature authority on the bank accounts.
  12. A means to resolve a deadlock or conflict.
  13. A provision providing for the dissolution of the partnership and formation of a California corporation or LLC if the partnership business reaches some milestone.

In addition to, or as part of, a written partnership agreement, the partners should also execute a buy-sell agreement to address the issue of the transferability of their partnership interest. Absent an agreement to the contrary, a partner may freely transfer his or her partnership interest to another person. In addition, absent an agreement to the contrary, the death, incapacity, bankruptcy, resignation or expulsion of any partner may automatically dissolve the partnership. To provide continuity, a buy-sell agreement can provide effective buy out provisions to address various situations.

 

 

family law, Legal

How Spousal Support is Decided in California: Legal Reason’s #52

Sanjay Sabarwal

California state law dictates that permanent spousal support is determined by carefully reviewing numerous factors. The court has tremendous discretion in setting alimony. If you are unable to settle or resolve this issue, then your attorney needs to develop detailed evidence about each factor set forth below.

The Amount of Spousal Support Expected in a California Divorce

The controlling statute that the court must consider in establishing permanent spousal support states the following:

4320. In ordering spousal support under this part, the court shall consider all of the following circumstances:

(a) The extent to which the earning capacity of each party is sufficient to maintain the standard of living established during the marriage, taking into account all of the following:

(1) The marketable skills of the supported party; the job market for those skills; the time and expenses required for the supported party to acquire the appropriate education or training to develop those skills; and the possible need for retraining or education to acquire other, more marketable skills or employment.

(2) The extent to which the supported party’s present or future earning capacity is impaired by periods of unemployment that were incurred during the marriage to permit the supported party to devote time to domestic duties.

(b) The extent to which the supported party contributed to the attainment of an education, training, a career position, or a license by the supporting party.

(c) The ability of the supporting party to pay spousal support, taking into account the supporting party’s earning capacity, earned and unearned income, assets, and standard of living.

(d) The needs of each party based on the standard of living established during the marriage.

(e) The obligations and assets, including the separate property, of each party.

(f) The duration of the marriage.

(g) The ability of the supported party to engage in gainful employment without unduly interfering with the interests of dependent children in the custody of the party.

(h) The age and health of the parties

(i) Documented evidence of any history of domestic violence, as defined in Section 6211, between the parties, including, but not limited to, consideration of emotional distress resulting from domestic violence perpetrated against the supported party by the supporting party, and consideration of any history of violence against the supporting party by the supported party.

(j) The immediate and specific tax consequences to each party.

(k) The balance of the hardships to each party.

(l) The goal that the supported party shall be self-supporting within a reasonable period of time. Except in the case of a marriage of long duration as described in Section 4336, a “reasonable period of time” for purposes of this section generally shall be one-half the length of the marriage. However, nothing in this section is intended to limit the court’s discretion to order support for a greater or lesser length of time, based on any of the other factors listed in this section, Section 4336, and the circumstances of the parties.

(m) The criminal conviction of an abusive spouse shall be considered in making a reduction or elimination of a spousal support award in accordance with Section 4325.

(n) Any other factors the court determines are just and equitable.

“The duration of spousal support is left to the discretion of the court within certain general equitable principals and guidelines.”

family law, Legal

When To Modify A Custody, or Visitation Order: Legal Reasons #52

Sanjay Sabarwal

When Can You File for a Modification of Child Custody Orders?

You may seek a modification of child custody and visitation orders at any time.  The court may find a visitation and/or child custody order modification “necessary or proper” if it’s in the child’s best interest [Ca Fam § 3022].  The parent who seeks the child custody modification will need to show the court a “significant change of circumstances” to support the modification request.

As a practical matter, many parents seek to change custody and have their request granted without showing a significant change of circumstances, or they or their attorneys create such a change of circumstances to justify their request.

Some Common Reasons for Seeking a Change of Custody Include:

  • The non-custodial parent’s work schedule changed
  • The non-custodial parent moved closer to the other parent
  • Child’s preference-the child desired to live with or spend more time with the non-custodial parent
  • One parent is being an irresponsible parent-not getting child to school on time or doing poorly in school, substance abuse issues, etc.
  • A parent seeks relocation outside of the geographic area where the child has resided, called a “move away case”

If you believe that your child should be spending more time with you and less with the other parent, consult with your attorney to explore your options.

family law, Legal

When Can Separate Property Become Community Property? Legal Reasons #51

Sanjay Sabarwal

There is a strong presumption under California law that assets and debts a couple accumulates during marriage are community property. Property one spouse owned alone before the marriage, or acquired by gift or inheritance during the marriage, is that spouse’s separate property. Separate property also generally includes items purchased with or exchanged for separate property, earnings on separate property, and any increase in value of separate property, as long as the property owner can prove the claim with financial records or other documents.

California law also provides that property spouses acquire before divorce but after the date of separation is separate property. The date of separation is not necessarily the date one spouse moves out of the marital home. Instead, it is the date that one spouse decides to end the marriage, and it requires some act of physical separation combined with other actions clearly demonstrating that the spouse has decided to end the marriage.

The date of separation can become a big issue if just before the divorce one spouse either earned an unusual amount of money—got a large bonus at work or won the lottery, for example—or spent a significant amount of money. If the couple can’t agree on a date, a court will decide after considering all of the evidence. Courts usually lean toward later rather than earlier dates when evidence conflicts, so that more property is included as community property, rather than less.

A couple can agree either before or during marriage to change an asset that was originally separate property into community property, or vice versa. Such agreements must be in writing and must clearly state the intentions of the parties; simply changing the title of the property is not enough.

Sometimes a spouse changes a separate asset into a community asset without meaning to by combining—or “commingling”—separate property with marital property. A premarital bank account belonging to one spouse can become marital property if the other spouse makes deposits to it; a house owned by one spouse alone can become marital property (either in whole or in part) if both spouses pay the mortgage and other expenses.

Many types of assets can be partially community and partially separate, including retirement accounts one spouse contributed to both before and after the marriage, or a business one spouse started before marriage and continued operating after marriage.

Distinguishing community property from separate property can become very complicated, especially if one spouse owns a business or other asset to which the other contributed labor or funds during the marriage. If you have a complex property situation, you may need to consult an attorney for advice. Spouses who can’t decide what belongs to whom will have to let a court decide whether commingled property was a gift to the marriage or whether the original owner should be reimbursed in whole or in part.