The Revised Uniform Partnership Act (RUPA) and the Uniform Partnership Act (UPA) state the events that will trigger the dissolution of a partnership and the disassociation of a partner. Dissolution does not necessarily discontinue the business, but does require there to be a settlement of financial affairs with the departing partner. The RUPA and UPA set forth how the financial affairs will be settled, unless there is an agreement to the contrary. Where there is an agreement, the agreement will control. The partnership agreement should be written so it covers the buy-out of a departing partner’s interest by the partnership.
The incoming partner’s relationship to the original partners should be covered by an amendment to the partnership agreement. At a minimum, this amendment should state the contribution of the new partner and the share of profits and losses and percentage of ownership interests of all partners. It should also contain a provision that the new partner agrees to be bound by all of the terms of the original partnership agreement.