In most U.S. partnerships, the decisions that require unanimous consent are the ones that change the fundamental deal: taking actions outside the ordinary course of business, admitting a new partner, amending the partnership agreement, selling core assets or the firm’s goodwill, and steps that would effectively end the business. These rules come from the Revised Uniform Partnership Act (RUPA), which most states have adopted in some form. They exist because partners usually carry personal liability for the firm’s obligations, and no one should have the terms of their investment rewritten by a vote they lost. Almost all of these thresholds are defaults, which means a well-drafted partnership agreement can change them.
Acts Outside the Ordinary Course of Business
This is the broadest unanimous-consent rule and the one partners run into most often. Under RUPA Section 401(j), routine disputes can be settled by a majority vote, but anything outside the ordinary course of business requires every partner’s approval.1The Uniform Partnership Act. The Uniform Partnership Act – Section 401 If you joined a landscaping firm, you signed up for landscaping risks, not cryptocurrency speculation.
Courts decide what counts as “ordinary” by looking at the firm’s actual history and stated business purpose. Buying inventory, renewing a lease, hiring seasonal staff for a retail business — these fall within the ordinary course. Entering a new industry, launching a product line the firm has never touched, or committing the partnership to a joint venture with another company usually does not. The further a proposed action sits from what the partnership has actually been doing, the stronger the argument that everyone has to sign off.
Substantial new debt deserves separate attention. Borrowing to cover normal operating expenses or buy standard inventory is usually ordinary. Financing a major expansion, mortgaging partnership property to secure a loan, or guaranteeing another entity’s debt exposes every partner to significantly more risk than they originally accepted. Those moves generally fall outside the ordinary course and need unanimous consent under the default rules.
Admitting a New Partner
No one becomes a partner without the consent of every existing partner. RUPA Section 401(i) makes this explicit.1The Uniform Partnership Act. The Uniform Partnership Act – Section 401 The rule reflects something basic about partnerships: you are personally liable for what your partners do. Admitting a new member changes profit shares, shifts the liability profile, and alters the management dynamic. A majority cannot force the remaining partners to accept a co-owner they did not choose.
Amending the Partnership Agreement
Changing the agreement also requires unanimity by default, because the agreement is the contract that defines everyone’s rights.1The Uniform Partnership Act. The Uniform Partnership Act – Section 401 If three partners want to cut a fourth partner’s share from 25% to 10%, they cannot simply outvote the fourth partner. Changing the distribution formula, altering management authority, or rewriting the terms under which a partner can exit all amount to creating a new deal, and every party to the original deal has to agree to the revised terms.
Mergers and conversions raise the same concern at a larger scale. Converting a general partnership into an LLC, or merging it with another entity, restructures the whole business, changing liability protections, tax treatment, and governance rights. Most states that have addressed this treat mergers and conversions of general partnerships as requiring unanimous approval unless the partnership agreement sets a different threshold.
Selling Core Assets, Goodwill, or the Firm Name
Selling property that sits at the core of the business, as opposed to regular inventory, is an extraordinary act. If a partnership owns the manufacturing plant where it makes its goods, selling that building is not a routine transaction. It eliminates the firm’s ability to operate. A subset of partners cannot liquidate the assets that keep the business running without every partner’s agreement.
Goodwill and the partnership name carry special weight. The firm’s reputation, client relationships, and brand identity are often its most valuable assets. Selling the right to trade under the partnership’s name strips the remaining partners of something they helped build and cannot easily replace. Under both the original Uniform Partnership Act and RUPA, disposing of the firm’s goodwill has long been treated as an act no individual partner can perform alone.
Actions That Can End the Business
Some decisions are drastic enough to shut the business down, and the law treats them accordingly. Under the traditional UPA framework, five categories of action are singled out as beyond any individual partner’s authority:
- Confessing a judgment, which lets a creditor obtain a court order for payment without a trial and can lead to immediate seizure of the firm’s bank accounts or property.
- Assigning partnership property to creditors, which hands control of assets to a third party to pay off debts.
- Disposing of the firm’s goodwill.
- Any act that makes continued operations impossible, such as surrendering a critical license or terminating an essential contract.
- Submitting a partnership claim to arbitration, which binds the firm to a dispute resolution process that removes the matter from court.
Each of these carries a degree of finality a simple majority should never be able to impose. Confessing a judgment, for instance, has roughly the same effect as a forced liquidation. The partner who agrees to it may intend to resolve a debt quickly, but the other partners lose their right to contest the claim in court and may find the firm’s assets seized before they even hear about the decision.
Voluntarily Dissolving the Partnership
Voluntarily dissolving a partnership and beginning the winding-up process typically requires unanimous consent as well. Every partner joined expecting the business to continue, and ending it prematurely over anyone’s objection defeats that expectation. An exception applies in most states when a partner has recently died or wrongfully left the partnership. In those situations, a majority vote is usually enough to approve dissolution, since the triggering event has already disrupted the firm.
Your Partnership Agreement Can Change These Rules
This is the single most important point many partners miss: nearly every unanimity requirement above is a default, not a mandate. RUPA Section 103(a) provides that the partnership agreement governs relations among partners, and the Act only fills in gaps where the agreement is silent.2Uniform Partnership Act (1997). Uniform Partnership Act 1997 – Section 103 If your agreement says amendments require a two-thirds vote instead of unanimity, that provision controls. Courts have upheld agreements that allow amendments with as little as 70% approval, even for substantial changes.
The flexibility is not unlimited. RUPA Section 103(b) lists provisions a partnership agreement cannot eliminate or unreasonably weaken:3The Uniform Partnership Act. The Uniform Partnership Act – Section 103
- The duty of loyalty. The agreement can identify specific activities that do not violate the duty, but cannot eliminate it entirely.
- The duty of care, which the agreement cannot unreasonably reduce.
- The obligation of good faith and fair dealing. The agreement can set performance standards but cannot eliminate the obligation.
- The right to access books and records, which the agreement cannot unreasonably restrict.
- A court’s power to expel a partner through judicial expulsion.
- A partner’s power to dissociate from the firm, although the agreement can require written notice.
Notice what is not on that list: the unanimity requirements from Section 401. Admitting new partners, approving extraordinary acts, and amending the agreement can all be made subject to majority or supermajority vote if the agreement says so. The practical point is that the agreement you signed matters more than the statutory defaults. If you have not read it recently, now is the time.
What Happens When a Partner Acts Without Consent
When a partner takes action without the required unanimous approval, two separate questions follow: Is the partnership bound to the third party? And what can the other partners do about it?
Whether the Partnership Is Bound
Every partner is an agent of the partnership for its business. If a partner’s act appears to fall within the ordinary course, the partnership is generally bound to the third party, even if the partner secretly lacked authority, unless the third party knew about the limitation. When the act is clearly outside the ordinary course, the partnership is only bound if the other partners actually authorized it. A partner who signs a contract that looks like normal business to the outside world can bind the firm even without internal approval. A partner who commits the firm to something obviously outside its scope, like a landscaping firm buying a restaurant, generally cannot bind the firm unless the other partners consented.
A partnership can file a statement of authority with the state to publicly declare what specific partners are or are not authorized to do. This is most useful for real property transactions, where a filed statement limiting a partner’s authority to transfer real estate is treated as public notice. For other transactions, third parties are generally not expected to check filed statements, so the protection is narrower.
Remedies Against the Partner Who Acted
The non-consenting partners have several options. They can seek a court-ordered accounting to trace what happened to partnership funds. They can pursue monetary damages for losses the unauthorized act caused. In serious cases, they can seek an injunction to block the transaction before it closes. If the unauthorized conduct rises to a breach of the duty of loyalty or care, the acting partner may face personal liability for any harm to the partnership. Courts can also order judicial expulsion of a partner whose wrongful conduct has materially harmed the firm. When the breach is severe enough to make continued operations impractical, dissolution becomes a remedy as well.
Documenting Unanimous Consent
A verbal agreement among partners in a conference room is legally fragile. Written documentation turns an understanding into something enforceable. A unanimous consent resolution should include each partner’s full legal name as it appears in the partnership agreement, a specific description of what is being authorized (including dollar amounts, asset descriptions, or the identity of a new partner being admitted), the date each partner signed, and the signature of every partner. A missing signature means the consent is not unanimous.
Partners do not need to be in the same room. Under the federal Electronic Signatures in Global and National Commerce Act, a signature cannot be denied legal effect solely because it is in electronic form.4Office of the Law Revision Counsel. 15 USC 7001 – General Rule of Validity Signatures through platforms like DocuSign or Adobe Sign, and in many cases email exchanges, can satisfy the requirement as long as the electronic record is associated with the agreement and reflects each signer’s intent. Most states have also adopted the Uniform Electronic Transactions Act, which provides a parallel framework at the state level. Keep the signed record in a format that remains accessible over time, and tie each partner’s signature clearly to the specific resolution it authorizes.