Sample Partnership Dispute Demand Letters
Sample 1: Demand for Partnership Accounting
[Your Name]
[Your Address]
[City, State ZIP]
[Phone Number]
[Email Address]
[Date]
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND EMAIL
[Partner Name]
[Partner Address]
[City, State ZIP]
RE: DEMAND FOR PARTNERSHIP ACCOUNTING
Partnership: [Partnership Name]
Partner Ownership: [Your Percentage]%
Dear [Partner Name]:
I am a [percentage]% partner in [Partnership Name] (the "Partnership"). I write to formally demand a complete accounting of all Partnership affairs pursuant to California Corporations Code Section 16405 and Article [X] of our Partnership Agreement dated [Date].
BACKGROUND
Since approximately [Date], I have been excluded from meaningful participation in Partnership financial matters. Despite my repeated requests, you have failed to provide me with current financial statements, bank account access, or any accounting of Partnership income and expenses. My most recent request on [Date] was ignored.
As a partner, I have the statutory and contractual right to full access to all Partnership books and records. Your refusal to provide this information constitutes a breach of your fiduciary duty of disclosure under Corporations Code Section 16403 and Section 16404(d).
DEMAND FOR ACCOUNTING
I hereby demand, within TWENTY (20) DAYS of your receipt of this letter, a complete accounting including:
1. Complete financial statements (balance sheet, income statement, cash flow) for the period from [Start Date] through present;
2. All bank statements for every Partnership account for the same period;
3. A detailed schedule of all Partnership income, by source;
4. A detailed schedule of all Partnership expenses, by category, with supporting documentation;
5. A schedule of all distributions made to any partner, including dates and amounts;
6. A schedule of all payments made to any partner for salary, consulting fees, expense reimbursements, or any other purpose;
7. All tax returns (federal and state) filed for the Partnership for the past [X] years;
8. A current schedule of all Partnership assets and liabilities;
9. All contracts and agreements to which the Partnership is a party;
10. Access to the Partnership's accounting software and bank accounts.
LEGAL BASIS
Under Corporations Code Section 16403(b), each partner has the right to inspect and copy Partnership books and records. Under Section 16405, a partner may maintain an action for an accounting whenever circumstances render it just and reasonable. Your exclusion of me from Partnership financial information makes such an accounting just and reasonable.
Additionally, under Section 16404(b)(1), you have a duty to account to the Partnership for any property, profit, or benefit derived in conducting Partnership business. Your failure to provide an accounting prevents me from determining whether you have complied with this duty.
CONSEQUENCES OF NON-COMPLIANCE
If you fail to provide the demanded accounting within 20 days, I will:
1. File a petition in [County] Superior Court for a judicial accounting pursuant to Corporations Code Section 16405;
2. Seek appointment of a receiver or accountant to conduct an independent examination of Partnership finances;
3. Pursue claims for breach of fiduciary duty and any damages resulting from your misconduct;
4. Seek recovery of my attorney's fees and costs as permitted by the Partnership Agreement and law.
I remain willing to resolve this matter amicably if you comply with your legal obligations. However, I will not continue to be excluded from financial information to which I am entitled.
This letter is not intended to waive any rights or remedies available to me under law or the Partnership Agreement, all of which are expressly reserved.
Sincerely,
[Your Signature]
[Your Printed Name]
cc: [Your Attorney, if applicable]
Sample 2: Demand for Profit Distribution
[Your Name]
[Your Address]
[City, State ZIP]
[Phone Number]
[Email Address]
[Date]
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
[Managing Partner Name]
[Partnership Name]
[Address]
[City, State ZIP]
RE: DEMAND FOR DISTRIBUTION OF PARTNERSHIP PROFITS
Partnership: [Partnership Name]
Period: [Start Date] through [End Date]
Amount Due: $[Amount]
Dear [Managing Partner Name]:
I am a [percentage]% partner in [Partnership Name] (the "Partnership"). I write to demand immediate distribution of my share of Partnership profits for the period [Start Date] through [End Date].
PROFIT DISTRIBUTION ENTITLEMENT
Under Article [X] of our Partnership Agreement, profits are to be distributed [quarterly/annually/as determined]. According to the Partnership's financial statements for the relevant period, the Partnership earned net profits of approximately $[Total Profit Amount]. My [percentage]% share of these profits equals $[Your Share Amount].
Despite the Partnership's profitability, you have refused to distribute any profits during this period. When I raised this issue on [Date], you claimed [state reason given, if any]. This justification is insufficient and does not comply with the Partnership Agreement or California law.
IMPROPER RETENTION OF PROFITS
Under California Corporations Code Section 16401(b), profits are to be shared equally among partners (or as otherwise specified in the partnership agreement). Your decision to retain all profits in the Partnership, or to use them for purposes not authorized by the Partnership Agreement, violates my rights as a partner.
I am aware that you have [describe any improper conduct, e.g., "taken a salary of $X that was not authorized," "made capital expenditures of $X without partner approval," "paid personal expenses totaling $X from Partnership funds"]. These actions further reduce the profits available for distribution and may constitute breaches of your fiduciary duty.
DEMAND
I demand payment of $[Amount] within FIFTEEN (15) DAYS of your receipt of this letter, representing my share of Partnership profits for the period [Dates]. Payment should be made by check payable to [Your Name] and mailed to my address above.
If the Partnership lacks sufficient cash for this distribution due to your mismanagement or misappropriation, I will hold you personally liable for the shortfall.
CONSEQUENCES OF NON-COMPLIANCE
If I do not receive payment within 15 days, I will:
1. File a lawsuit against you and the Partnership for breach of the Partnership Agreement and breach of fiduciary duty;
2. Seek a full accounting of all Partnership finances pursuant to Corporations Code Section 16405;
3. Pursue dissolution of the Partnership under Corporations Code Section 16801(5) on grounds that it is not reasonably practicable to carry on business with you;
4. Seek all damages, including punitive damages for breach of fiduciary duty, as well as attorney's fees and costs.
I strongly urge you to resolve this matter by making the demanded distribution. I am willing to meet to discuss a reasonable approach to ongoing profit distributions, but I will not continue to have my share of profits withheld without legal justification.
This letter is not intended to waive any rights or remedies available to me under law or the Partnership Agreement, all of which are expressly reserved.
Sincerely,
[Your Signature]
[Your Printed Name]
Sample 3: Notice of Breach of Fiduciary Duty
[Your Name]
[Your Address]
[City, State ZIP]
[Phone Number]
[Email Address]
[Date]
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
[Partner Name]
[Address]
[City, State ZIP]
RE: NOTICE OF BREACH OF FIDUCIARY DUTY
Partnership: [Partnership Name]
Demand for Remedy and Disgorgement
Dear [Partner Name]:
I write to notify you that your actions constitute serious breaches of the fiduciary duties you owe to me and to [Partnership Name] (the "Partnership") under California law. This letter demands that you cease your wrongful conduct immediately and disgorge all benefits improperly obtained.
FIDUCIARY DUTIES OWED
As partners, we owe each other the highest fiduciary duties recognized in law. Under California Corporations Code Section 16404:
- You must account to the Partnership for any property, profit, or benefit derived from use of Partnership property or in conducting Partnership business (Section 16404(b)(1));
- You must refrain from dealing with the Partnership as an adverse party (Section 16404(b)(2));
- You must refrain from competing with the Partnership (Section 16404(b)(3));
- You must discharge your duties with the care of an ordinarily prudent person (Section 16404(c)).
BREACHES OF FIDUCIARY DUTY
I have discovered that you have engaged in the following conduct in violation of your fiduciary duties:
1. SELF-DEALING: [Describe specific self-dealing transactions, e.g., "On or about [Date], you caused the Partnership to enter into a contract with [Company Name], a company in which you have a [X]% ownership interest. The contract terms were [describe unfavorable terms]. You did not disclose your interest in [Company Name] or obtain my consent to this transaction."]
2. USURPATION OF PARTNERSHIP OPPORTUNITY: [Describe, e.g., "I have learned that you personally acquired [describe opportunity] on [Date]. This opportunity came to you through your position as a partner and belonged to the Partnership. You took it for yourself without offering it to the Partnership or obtaining my consent."]
3. COMPETITION: [Describe, e.g., "You have been operating [Competing Business Name] since approximately [Date], providing the same services as our Partnership to clients in the same market. This directly competes with the Partnership in violation of your duty of loyalty."]
4. MISAPPROPRIATION: [Describe, e.g., "Partnership records show that you have withdrawn $[Amount] from Partnership accounts for personal expenses, including [describe expenses]. These withdrawals were not authorized distributions and were not disclosed to me."]
DEMAND FOR REMEDY
I demand that within FOURTEEN (14) DAYS of your receipt of this letter, you:
1. CEASE all competitive activities and self-dealing transactions immediately;
2. DISGORGE to the Partnership all profits, benefits, and compensation you received from:
- [Self-dealing transaction]: $[Amount]
- [Usurped opportunity]: $[Amount]
- [Competing business relating to Partnership clients/opportunities]: $[Amount]
- [Misappropriated funds]: $[Amount]
TOTAL DISGORGEMENT DEMANDED: $[Total Amount]
3. PROVIDE a complete accounting of all your dealings that may have involved Partnership property, opportunities, or clients;
4. ASSIGN to the Partnership any contracts, customer relationships, or other property that you wrongfully obtained.
LEGAL CONSEQUENCES
If you fail to comply with these demands, I will immediately:
1. File a lawsuit against you for breach of fiduciary duty, seeking compensatory and punitive damages;
2. Seek a constructive trust over all assets you obtained through breach of fiduciary duty;
3. Petition for judicial dissolution of the Partnership under Corporations Code Section 16801(5)(B), as your conduct makes it not reasonably practicable to carry on business with you;
4. Seek appointment of a receiver to protect Partnership assets;
5. Report your conduct to any applicable licensing authorities.
Under California law, I may recover not only my share of the profits you wrongfully obtained, but also punitive damages for your intentional breach of fiduciary duty. I will pursue the maximum remedies available.
I am prepared to litigate this matter if necessary. However, I am also willing to discuss a resolution that includes full disgorgement, restructuring of the Partnership, or a buyout of your interest at fair value (without premium for goodwill you have impaired).
This letter is not intended to waive any rights or remedies available to me under law or the Partnership Agreement, all of which are expressly reserved.
Sincerely,
[Your Signature]
[Your Printed Name]
cc: [Your Attorney]
Sample 4: Demand for Dissolution and Buyout
[Your Name]
[Your Address]
[City, State ZIP]
[Phone Number]
[Email Address]
[Date]
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
[Partner Name]
[Address]
[City, State ZIP]
RE: NOTICE OF DISSOCIATION AND DEMAND FOR BUYOUT
Partnership: [Partnership Name]
Effective Date of Dissociation: [Date]
Dear [Partner Name]:
This letter serves as formal notice of my dissociation from [Partnership Name] (the "Partnership") pursuant to California Corporations Code Section 16601(1), effective [Date, typically 30 days from letter date or as specified in partnership agreement].
Alternatively, if you wish to continue the Partnership business, I demand that you purchase my partnership interest at fair value as provided by Corporations Code Section 16701.
GROUNDS FOR DISSOCIATION
I am exercising my right to dissociate from the Partnership due to the following circumstances:
1. [Describe primary reasons, e.g., "Irreconcilable differences regarding the management and direction of the Partnership"];
2. [E.g., "Your repeated breaches of fiduciary duty as detailed in my letter dated [Date]"];
3. [E.g., "Your refusal to provide access to Partnership financial records"];
4. [E.g., "The economic purpose of the Partnership has been frustrated by your conduct"].
Under Corporations Code Section 16601(1), a partner may dissociate at any time by express will. This notice constitutes my express will to dissociate.
BUYOUT DEMAND
Under Corporations Code Section 16701, upon my dissociation, the Partnership must purchase my interest at a price equal to the greater of:
(a) The liquidation value of my interest; or
(b) The value of my interest based on the right to share in distributions from the Partnership.
I demand that you provide, within THIRTY (30) DAYS:
1. A proposed buyout price for my [percentage]% interest, with supporting calculations and documentation;
2. Complete financial statements for the Partnership for the past [three] years;
3. A current balance sheet showing all assets and liabilities at fair market value;
4. An independent business valuation, if you dispute my valuation;
5. Proposed payment terms for the buyout.
VALUATION OF MY INTEREST
Based on my analysis, the fair market value of my partnership interest is approximately $[Amount], calculated as follows:
Partnership Assets at Fair Market Value: $[Amount]
Less: Partnership Liabilities: ($[Amount])
Net Asset Value: $[Amount]
Partnership Goodwill: $[Amount]
Total Partnership Value: $[Amount]
My [percentage]% Interest: $[Amount]
If you disagree with this valuation, I am willing to engage a mutually agreed independent appraiser to determine fair value. Each party shall pay half the appraisal cost.
TERMS OF BUYOUT
I expect the buyout to be completed within [60/90] days of agreement on price. Payment terms should include:
1. [Percentage]% of the purchase price at closing;
2. The balance paid over [time period] with interest at [rate]%;
3. Security for deferred payments (personal guarantee, UCC filing on business assets);
4. Release of my personal guarantees on any Partnership obligations.
ALTERNATIVE: DISSOLUTION
If you are unwilling or unable to purchase my interest at fair value, I demand dissolution and winding up of the Partnership pursuant to Corporations Code Section 16801. Upon dissolution:
1. All Partnership assets shall be liquidated;
2. Partnership debts shall be paid;
3. The remaining proceeds shall be distributed according to our respective interests;
4. I will participate fully in the winding up process.
DEADLINE FOR RESPONSE
Please respond in writing within THIRTY (30) DAYS indicating:
1. Whether you will purchase my interest, and if so, your proposed price and terms; or
2. Whether you agree to dissolution of the Partnership.
If I do not receive a substantive response within 30 days, I will file a petition for judicial dissolution under Corporations Code Section 16801(5), seeking appointment of a receiver to protect Partnership assets and oversee the winding up process.
This letter is not intended to waive any rights or remedies available to me under law or the Partnership Agreement, all of which are expressly reserved.
Sincerely,
[Your Signature]
[Your Printed Name]
cc: [Your Attorney]