Legal Memorandum: Transfer of Partnership Interests in MN

Issue: Whether one partner’s right to contribution from other partners, based on the partnership, is a ‘transferable interest’ in Minnesota.

Not all partnership interests are transferrable.  Minn. Stat. § 323A.0502. This statute provides that “[t]he only transferable interest of a partner in the partnership is the partner’s share of the profits and losses of the partnership and the partner’s right to receive distributions. The interest is personal property.”  Id.  Moreover, it has been expressly stated that one spouse’s entire partnership interest cannot be conveyed to the other spouse even by a divorce decree.  In Spearman v. Salimen, 379 N.W.2d 627 (Minn. Ct. App. 1986), the court explained that “[a] decree of marriage dissolution cannot confer partnership rights upon one who was not originally a partner.  A partnership is a contractual arrangement, and consent of the contracting parties is required before a partnership relationship may be established.”  Id. at 631 (citations omitted).

However, it is arguable, at least, that the right to seek contribution is “transferable,” because it is in the nature of a “distribution” or “share of the profits or losses of the partnership.”  According to the official comments to Uniform Partnership Act § 502, a provision identical to the Minnesota statute, the section is intended to permit the transfer of “financial rights,” but prohibit the transfer of “management of business” rights.   The comment explains:

[A] partner’s only transferable interest in the partnership is the partner’s share of profits and losses and right to receive distributions, that is, the partner’s “financial rights.”

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A partner has other […]

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