Partner’s Rights to Inspection and Accounting in a Partnership

A partnership is formed when two or more people agree to jointly operate a business. The partnership agreement and statutory law govern key features of the relationship between the parties. One such matter is access to the books and records of the partnership. The partnership is expected to maintain thorough and accurate record keeping practices. The right of access allows the partner or former partner, his agents and attorneys the right to copy the books and records governing the partnership.

California law specifically provides that each partner must make available to his fellow partners (i) information concerning the partnership necessary for the partner to exercise his rights and duties pursuant to the agreement as a matter of course and (ii) any information related to the partnership’s business that is deemed reasonable upon demand. The partnership agreement is prohibited from unreasonably limiting the right of any one partner from inspecting the partnership documents.

Another important right held by each partner is the ability to demand an accounting against the partnership. This action compels the other partners to account for any benefit or property garnered from transactions in the course of dissolving or conducting the partnership, or from the use of property owned by the partnership. An accounting is typically pursued as a course of action when terminating or withdrawing from the agreement. However, the right of accounting also exists when: (i) specified in the partnership agreement, (ii) one partner is denied access to partnership property or prevented from engaging in business dealings of the partnership, or (iii) conditions deem an accounting just and reasonable.

If one partner initiates an action for accounting, the other partners are required to present a report concerning the partnership business and provide information about dealings involving partnership property. Such an action may also determine whether either partner has violated his fiduciary duties to his fellow partner. In accounting for a particular transaction, a partner who has breached his fiduciary duty may be sued for damages and be forced to relinquish profits garnered from the transaction.

Contact Shane Coons at 949-333-0900 or visit his website at www.ShaneCoonsLaw.com to find out more about his practice.