Can I Sue My Business Partner in California?
By Matthew W. Reiser | Last reviewed September 30, 2026
Yes. California law gives partners, LLC members and shareholders several ways to hold a co-owner accountable, including claims for breach of fiduciary duty, statutory rights to inspect the company's books, and, in serious cases, a court-ordered dissolution or buyout. Which tools apply depends first on what kind of entity you own together.
Start with the entity
The rules differ for general partnerships, limited liability companies and corporations, and the governing agreement can change many of the defaults. Before anything else, gather the partnership agreement, operating agreement or bylaws and any shareholder agreement. Those documents often contain buy-sell provisions, valuation formulas, arbitration clauses and notice requirements that control what happens next.
Partnerships: duties of loyalty and care
Under California's Uniform Partnership Act, a partner's fiduciary duties to the partnership and the other partners are the duty of loyalty and the duty of care. Cal. Corp. Code § 16404(a). The duty of loyalty requires a partner to account for and hold as trustee any profit or benefit derived from partnership business or property, including the taking of a partnership opportunity; to refrain from dealing with the partnership on behalf of an adverse party; and to refrain from competing with the partnership before dissolution. Id. § 16404(b). The duty of care is limited to refraining from grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law. Id. § 16404(c).
LLCs: who owes the duties
In a member-managed LLC, members owe similar duties of loyalty and care. Cal. Corp. Code § 17704.09(a)-(c). In a manager-managed LLC, those duties fall on the managers, and, except as otherwise provided, a member does not owe fiduciary duties solely by reason of being a member. Id. § 17704.09(f). That distinction often decides who the right defendant is.
Getting the records
Many disputes begin with information. LLC members have the right, for purposes reasonably related to their interest as members, to inspect and copy the company's required records and to obtain certain information from the company. Cal. Corp. Code § 17704.10. Corporate shareholders may inspect the accounting books, records and minutes on written demand for a purpose reasonably related to their interests as shareholders. Cal. Corp. Code § 1601. A refusal to produce records is often the first sign that a lawsuit will be needed, and courts can order production.
Dissolution and buyouts
When co-owners cannot continue together, California law allows a court to dissolve the business in defined circumstances.
- LLCs. A manager or member may ask a court to dissolve an LLC when, among other grounds, it is not reasonably practicable to carry on the business under the operating agreement, management is deadlocked or subject to internal dissension, or those in control have engaged in or knowingly countenanced persistent and pervasive fraud, mismanagement or abuse of authority. Cal. Corp. Code § 17707.03(a)-(b).
- Corporations. Shareholders holding at least 33 1/3 percent of the relevant shares, or any shareholder of a close corporation, may file for involuntary dissolution on grounds that include deadlock and persistent fraud, mismanagement, abuse of authority or persistent unfairness toward shareholders. Cal. Corp. Code § 1800(a)-(b).
In either case, the other owners can often avoid dissolution by buying out the complaining owner. For corporations, the corporation or the holders of 50 percent or more of the voting power may purchase the moving parties' shares for cash at their fair value. Cal. Corp. Code § 2000(a). The LLC statute contains a similar buyout mechanism. Cal. Corp. Code § 17707.03(c). In practice, the dissolution petition often becomes the vehicle for a court-supervised valuation and buyout.
Direct or derivative
Some harms belong to the company, such as a partner diverting company funds, and must usually be pursued on the company's behalf. Others, such as being frozen out of distributions you are owed, may be personal. Getting this right affects who must be sued, whether a pre-suit demand is required and who receives any recovery.
Arbitration clauses
Many operating and partnership agreements require arbitration. A petition to compel arbitration, or to confirm or vacate an award, is often part of the case.
How we handle these disputes
Founders of early-stage companies can read about co-founder and startup disputes in the Bay Area. Our article on the implied covenant of good faith in California covers a contract claim that often accompanies these disputes.
Reiser Law represents partners, LLC members, founders and minority and majority shareholders, as plaintiffs and defendants. Read more about partnership, LLC and shareholder disputes in California and breach of fiduciary duty litigation, or contact our San Francisco Bay Area office.
This article is general information, not legal advice, and reading it does not create an attorney-client relationship. The law changes, and its application depends on the facts of each case. Attorney advertising.