Can a business partner act without the other partners?
When you hear the words business partner, you probably envision people always working in close collaboration on all key matters pertaining to a company. But what if your business partner makes a deal to acquire a major new client or drop a client, for example, without your knowledge or consent?
The important question is do they have the legal right and authority to act unilaterally on behalf of the company? It depends on how the company is structured. Also, according to Chron, “…[S]teps can be taken to prevent any one partner from entering into an agreement without the consent of the others.”
The two main kinds of partnerships
First, it helps to be aware of the two kinds of business partnerships. In a limited partnership, there can be one group of partners who are authorized to act in a managerial capacity; another group of partners in that same company doesn’t. Limited partners aren’t responsible for debts the company incurs, and they also “cannot enter into agreements that would bind the business.”
In a general partnership, the partners share responsibility for a company’s debts and authority for high-level decisions.
California is covered by the Uniform Partnership Act
This legislation applies some curbs on what general partners are allowed to do. For instance, each of the partners is obligated to exhibit “a duty of loyalty and care” when acting on behalf of the company. That means the law must be respected by each partner, anything that is done has to be reasonable and sensible, not haphazard and no individual partner can do something to financially benefit solely themselves and not the others.
Other rules that govern how authority is used
If you choose to limit authority, there are two things you can do. One is to tell individuals and other companies “that no single partner can bind the business.” You can also write limitations on what partners can do into your business agreement.
Something called apparent authority means that if someone does business with a person representing your company and assumes that they have the right to “bind the business, the contract is valid.”
What partners can do in a company can be complicated
This issue is complex. If you need clarification on what a partner can legally do, have the subject explained to you by a well-versed professional source.