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  1. #1

    Smile Ending Non-Profit Business Partnership - but Keeping Business Open

    My question involves business law in the state of: California.
    I have a business partnership with someone with whom I have been in business with for over ten years. We have a non-profit the deals with abused and neglected kids. For eight years we had a little business ($400,000) and then after years of (me) working relationships) we finally grew the business and now we are at $1.4m (all from the state). We are still growing b/c I have established an excellent relationship with our community partners and we deliver excellent services. My business partner, however, is not providing any real attributes to the business. She works minimally, only really does payroll, and that's about it. I have loyalty to her, and friendship (but that is in decline). As our business is growing, I see her as a growing liability, not an asset.

    Removing her as CEO (I am the Board President) would not be difficult), that is a Board decision, and the case is simple (and my case would be to provide her with a founders stipend for a period of time after removal for her contribution to the business).

    However, she and I have a "Partnership Agreement" we agreed to together (without an attorney), but we did have it notarized.

    The business is a 501(c)3.

    Am I able to separate her from the business? Or am I legally ties to her?

    I can go into more specifics about why I need to do this. It is big things, not small things.

    Thanks in advance for any help!

    Annie

  2. #2
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    Default Re: Ending Non-Profit Business Partnership - but Keeping Business Open

    I'm not sure how paying somebody money to do nothing would be consistent with your organization's 501(C)(3) exemption, but if the board approves that's something for your organization to work out with its attorney.

    Once you choose to become a charitable, nonprofit organization, "ownership" becomes quite different than it would be with an ordinary corporation. As you have noted, even if it requires board approval, your 'partner' can be fired.

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