Continuation of a General Partnership After Expiration of Its Term
General Partnerships
Continuation of a General Partnership After Expiration of Term
October 8, 2026 · R|R Insights · CA Business Law Brief
Core Concept
A general partnership formed for a definite term or a particular undertaking may, upon expiration of that term or completion of that undertaking, continue as a partnership at will if the partners—or a majority of them—continue the business without winding up (Cal. Corp. Code § 16406). This “holdover” or continuation rule prevents automatic dissolution and the attendant chaos of winding up when partners simply continue doing business past the originally agreed endpoint.
A partnership at will, by contrast, is one in which any partner may rightfully dissociate at any time without triggering liability for wrongful dissociation. When a term partnership converts to a partnership at will by continuing past its term, the dissociation rules change materially: any partner may now leave without being in breach. This matters significantly for the buy-out rights and liability consequences that flow from wrongful vs. rightful dissociation.
Partners should expressly address renewal or continuation in their partnership agreement to avoid uncertainty. A well-drafted agreement will specify whether the partnership automatically extends for a new term, converts to at-will, or requires affirmative action by the partners to continue. In the absence of such provisions, California RUPA’s default continuation rule applies.
Key Rules
| Continuation creates at-will partnership | Partners may renegotiate terms |
| If partners continue business after expiration of a term, the partnership becomes a partnership at will (§ 16406(a)). | Upon continuation, partners may negotiate new terms; the old term agreement no longer governs absent express extension. |
| Any partner may dissociate from at-will partnership | Wrongful dissociation from term partnership |
| After conversion to at-will, any partner may rightfully dissociate at any time; no breach liability for leaving (§ 16601(1)). | Leaving before a term expires, in breach of the agreement, is wrongful—exposes partner to damages and forfeiture of buy-out premium (§ 16602). |
| Majority required to continue | Express continuation provision preferred |
| A majority-in-interest of partners must continue the business for the holdover rule to apply; a single partner continuing alone does not create a partnership (§ 16406(a)). | Draft agreements to specify: auto-renewal for new term, conversion to at-will, or winding up—avoid relying on the default rule. |
Applies / Does Not Apply
| ✓ Applies When | ✗ Does Not Apply When |
| Two-year joint venture partnership continues operating after the 2-year term without winding up | All partners agree to wind up and no one continues the business after the term (no holdover—dissolution proceeds) |
| Partners tacitly agree to continue the business past the original project completion date | Single remaining partner continues alone after term (one person cannot form a partnership unilaterally) |
| Partnership continues business after death or withdrawal of one partner (if majority continues) | Operating agreement expressly provides for dissolution upon expiration of term (no holdover default applies) |
In Practice
| Transactional | Litigation |
| In term partnership agreements, always include a clear provision on what happens at term’s end: automatic renewal, affirmative vote requirement, or dissolution default. Building in a renewal election clause 60–90 days before term end gives partners time to make a deliberate decision rather than stumbling into at-will status. | In partnership disputes involving post-term conduct, trace whether the partnership converted to at-will and when. A partner who dissociates after conversion to at-will has no breach liability, materially changing the damages analysis compared to dissociation from an unexpired term partnership. |
This brief is for informational purposes only and does not constitute legal advice. For counsel on specific matters, consult qualified legal counsel. © 2026 Reden | Riddell LLP.