Relations of Partners to Each Other and to Partnership.

Ala. Code tit. 10A, ch. 8A, art. 4

in effect

Ala. Code § 10A-8A-4.01 Partner’s Rights and Duties.

10A-8A-4.01. Partner’s Rights and Duties. (a) Each partner is deemed to have an account that is: (1) credited with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, the partner contributes to the partnership and the partner’s share of the partnership profits; and (2) charged with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, distributed by the partnership to the partner and the partner’s share of the partnership losses provided that a partner shall not be charged with any share of partnership loss attributable to a debt, obligation, or liability for which the partner is not personally liable under Section 10A-8A-3.06 unless the loss is satisfied out of partnership assets. (b) Each partner is entitled to an equal share of the partnership profits and, subject to the limitations in subsection (a)(2) of this section, is chargeable with a share of the partnership losses in proportion to the partner’s share of the profits. (c) A partnership shall reimburse a partner for payments made and indemnify a partner for liabilities incurred by the partner in the ordinary course of the business or not for profit activity of the partnership or for the preservation of its business or not for profit activity or property; provided, however, no partner in a limited liability partnership shall be required as a consequence of the indemnification to make any payment on behalf of the limited liability partnership to any other partners to the extent that the payment would be inconsistent with Sections 10A-8A-3.06, 10A-8A-8.06, or 10A-8A-8.07. (d) A partnership shall reimburse a partner for an advance beyond the amount of capital the partner agreed to contribute. (e) A payment or advance made by a partner which gives rise to a partnership obligation under subsection (c) or (d) constitutes a loan to the partnership which accrues interest from the date of the payment or advance. (f) Each partner has equal rights in the management and conduct of the partnership business or not for profit activity. (g) A partner may use or possess partnership property only on behalf of the partnership. (h) A partner is not entitled to remuneration for services performed for the partnership, except for reasonable compensation for services rendered in winding up the business or not for profit activity of the partnership. (i) A difference arising as to a matter in the ordinary course of business or not for profit activity of a partnership may be decided by a majority of the partners. An act outside the ordinary course of business or not for profit activity of a partnership and an amendment to the partnership agreement may be undertaken only with the consent of all of the partners. (j) This section does not affect the obligations of a partnership to other persons under Section 10A-8A-3.01. (Act 2018-125, §7.)

Ala. Code § 10A-8A-4.02 Admission of Partner.

10A-8A-4.02. Admission of Partner. (a) The initial partners of a partnership are admitted as partners upon the formation of the partnership. (b) After formation, a person is admitted as a partner of the partnership: (1) as provided in the partnership agreement; (2) as the result of a transaction effective under Article 9 of this chapter or Article 8 of Chapter 1; (3) with the consent of all the partners; or (4) as provided in Section 10A-8A-8.01(6) or 10A-8A-8.01(7). (c) Each person to be admitted as a partner to a partnership formed under either Section 10A-8A-2.01(a)(1) or 10A-8A-2.01(a)(2) may be admitted as a partner without: (1) acquiring a transferable interest; or (2) making or being obligated to make a contribution to the partnership. (Act 2018-125, §7.)

Ala. Code § 10A-8A-4.03 Form of Contribution.

10A-8A-4.03. Form of Contribution. A contribution by a partner may be made to a partnership as agreed by the partners. (Act 2018-125, §7.)

Ala. Code § 10A-8A-4.04 Liability for Contribution.

10A-8A-4.04. Liability for Contribution. (a) A partner’s obligation to make a contribution to a partnership is not excused by the partner’s death, disability, or other inability to perform personally. (b) If a partner does not make a contribution required by an enforceable promise, the partner or the partner’s estate is obligated, at the election of the partnership, to contribute money equal to the value of the portion of the contribution that has not been made. The foregoing election shall be in addition to, and not in lieu of, any other rights, including the right to specific performance, that the partnership may have under the partnership agreement or applicable law. (c) The obligation of a partner to make a contribution to a partnership may be compromised only by consent of all partners. A conditional obligation of a partner to make a contribution to a partnership may not be enforced unless the conditions of the obligation have been satisfied or waived as to or by that partner. Conditional obligations include contributions payable upon a discretionary call of a partnership before the time the call occurs. (d) A creditor of a limited liability partnership which extends credit or otherwise acts in reliance on an obligation described in subsection (a), without notice of any compromise under this subsection, may enforce the original obligation. (e) A promise by a partner to make a contribution to a partnership is not enforceable unless set forth in a writing signed by the partner. (Act 2018-125, §7.)

Ala. Code § 10A-8A-4.05 Sharing of Distributions Before Dissolution.

10A-8A-4.05. Sharing of Distributions Before Dissolution. All partners shall share equally in any distributions made by a partnership before its dissolution and winding up. (Act 2018-125, §7.)

Ala. Code § 10A-8A-4.06 Interim Distributions.

10A-8A-4.06. Interim Distributions. Subject to Section 10A-8A-7.01, a partner has a right to a distribution before the dissolution and winding up of a partnership as provided in the partnership agreement. A decision to make a distribution before the dissolution and winding up of the partnership is a decision in the ordinary course of the business or not for profit activity of the partnership. (Act 2018-125, §7.)

Ala. Code § 10A-8A-4.07 Distribution in Kind.

10A-8A-4.07. Distribution in Kind. A partner does not have a right to demand and receive a distribution from a partnership in any form other than money. Except as otherwise provided in Section 10A-8A-8.07, a partnership may distribute an asset in kind if each partner receives a percentage of the asset in proportion to the partner’s share of distributions. (Act 2018-125, §7.)

Ala. Code § 10A-8A-4.08 Right to Distribution.

10A-8A-4.08. Right to Distribution. If a partner becomes entitled to receive a distribution, the partner has the status of, and is entitled to all remedies available to, a creditor of the partnership with respect to the distribution. However, the partnership’s obligation to make a distribution is subject to offset for any amount owed to the partnership by the partner or dissociated partner on whose account the distribution is made. (Act 2018-125, §7.)

Ala. Code § 10A-8A-4.09 Limitations of Distribution and Liability for Improper Distributions.

10A-8A-4.09. Limitations of Distribution and Liability for Improper Distributions. (a) A limited liability partnership shall not make a distribution to a partner to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the limited liability partnership, other than liabilities to partners on account of their transferable interests and liabilities for which the recourse of creditors is limited to specific property of the limited liability partnership, exceed the fair value of the assets of the limited liability partnership, except that the fair value of the property that is subject to a liability for which recourse of creditors is limited shall be included in the assets of the limited liability partnership only to the extent that the fair value of the property exceeds that liability. (b) A partner who consents to a distribution in violation of subsection (a) or the partnership agreement, and who knew at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall be liable to the limited liability partnership for the amount of that distribution. (c) A partner who receives a distribution in violation of subsection (a) or the partnership agreement, and who knew at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall be liable to the limited liability partnership for the amount of the distribution received by that partner. A partner who receives a distribution in violation of subsection (a) or the partnership agreement, and who did not know at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall not be liable for the amount of the distribution received by that partner. (d) Except as provided in subsection (e), this section shall not affect any obligation or liability of a partner under other applicable law for the amount of a distribution. (e) An action under this section or other applicable law is barred if not commenced within two years after the distribution. (f) For purposes of subsection (a), “distribution” does not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of the limited liability partnership’s business or not for profit activity under a bona fide retirement plan or other benefits program. (g) This section shall not apply to distributions made in accordance with Section 10A-8A-8.09. (Act 2018-125, §7.)

Ala. Code § 10A-8A-4.10 Right of Partner and Former Partner to Information.

10A-8A-4.10. Right of Partner and Former Partner to Information. (a) Subject to subsection (f), a partner, without having any particular purpose for seeking the information, may inspect and copy during regular hours at a reasonable location specified by the partnership, required information and any other records maintained by the partnership regarding the partnership’s business or not for profit activity and financial condition. (b) Subject to subsection (f), each partner and the partnership shall furnish to a partner: (1) without demand, any information concerning the partnership’s business or not for profit activity reasonably required for the proper exercise of the partner’s rights and duties under the partnership agreement or this chapter; and (2) on demand, any other information concerning the partnership’s business or not for profit activity, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances. (c) Subject to subsections (e) and (f), on 10 days’ demand made in a writing received by the partnership, a person dissociated as a partner may have access to the information and records described in subsection (a) at the location specified in subsection (a) if: (1) the information or writing pertains to the period during which the person was a partner; (2) the person seeks the information or record in good faith; and (3) it is determined that: (i) the person seeks the information for a purpose reasonably related to the person’s interest as a partner; (ii) the person’s demand describes with reasonable particularity the information sought and the purpose for seeking the information; and (iii) the information sought is directly connected to the person’s purpose. (d) Within 10 days after receiving a demand pursuant to subsection (c), the partnership in a writing shall inform the person that made the demand: (1) what information the partnership will provide in response to the demand; (2) when and where the partnership will provide the information; (3) if the partnership declines to provide any demanded information, the partnership’s reasons for declining; and (4) what, if any, restrictions will be imposed pursuant to the partnership agreement or subsection (f). (e) If a partner dies, Section 10A-8A-5.04 applies. (f) In addition to any restriction or condition stated in its partnership agreement, a partnership, as to a matter within the ordinary course of its business or not for profit activity, may: (1) impose reasonable restrictions and conditions on access to and use of information to be furnished under this section, including designating information confidential and imposing nondisclosure and safeguarding obligations on the recipient; (2) keep confidential from the partners and any other person, for such period of time as the partnership deems reasonable, any information that the partnership reasonably believes to be in the nature of trade secrets or other information the disclosure of which the partnership in good faith believes is not in the best interest of the partnership or could damage the partnership or its business or not for profit activity, or that the partnership is required by law or by agreement with a third party to keep confidential; and (3) redact portions of the records to be inspected and copied to the extent the portions so redacted are not directly related to the partner’s or other person’s purpose. In any dispute concerning the reasonableness of a restriction under this subsection, the partnership has the burden of proving reasonableness. (g) A partnership may charge a person that makes a demand under this section reasonable costs of copying, limited to the costs of labor and material. (h) A partner or person dissociated as a partner may exercise the rights under this section through an attorney or other agent. Any restriction imposed under subsection (f) or by the partnership agreement applies both to the attorney or other agent and to the partner or person dissociated as a partner. If the demanding person’s agent or attorney is to inspect and copy the books and records of the partnership, the demand shall be accompanied by a power of attorney or other writing which authorizes the agent or attorney to so act on behalf of the demanding person. (i) The rights under this section do not extend to a person as transferee, but the rights under subsection (c) of a person dissociated as a partner may be exercised by the legal representative of an individual who dissociated as a partner under Section 10A-8A-6.01(6). (j) The rights under this section may be denied by the partnership if the partnership determines that the demanding person has within two years preceding his, her, or its demand improperly used any information secured through any prior examination of the records of the partnership. (k) If a partnership does not within a reasonable time allow a person who complies with the requirements of this section to inspect and copy the records required by this section, the person who complies with this section may apply to the designated court, and if none, the circuit court for the county in which the partnership’s principal office is located in this state, and if none in this state, the circuit court for the county in which the partnership’s most recent registered office is located for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis. If the court orders inspection and copying of the records demanded under this section, it may impose reasonable restrictions on their confidentiality, use, or distribution by the demanding person and the court shall also order the partnership to pay the demanding person’s expenses incurred to obtain the order unless the partnership establishes that the partnership refused inspection in good faith because the partnership had: (1) a reasonable basis for doubt about the right of the demanding person to inspect the records demanded; or (2) required reasonable restrictions on the confidentiality, use, or distribution of the records demanded to which the demanding person had been unwilling to agree. If the partnership has declined to deliver or make available the records because the demanding person had been unwilling to agree to restrictions proposed by the partnership on the confidentiality, use, or distribution of the records, the partnership shall have the burden of demonstrating that the restrictions proposed by the partnership were reasonable. (Act 2018-125, §7; Act 2021-299, §5; Act 2026-495, §1.)

Ala. Code § 10A-8A-4.11 General Standards of Partner’s Conduct.

10A-8A-4.11. General Standards of Partner’s Conduct. (a) The duties that a partner has to the partnership and to the other partners include the duty of loyalty and the duty of care as described in subsections (b) and (c). (b) A partner’s duty of loyalty to the partnership and to the other partners includes each of the following: (1) To account to the partnership and to hold as trustee for it any property, profit, or benefit derived by the partner in the conduct or winding up of the partnership’s business or not-for-profit activity or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity. (2) To refrain from dealing with the partnership in the conduct or winding up of the partnership’s business or not-for-profit activity as or on behalf of a party having an interest adverse to the partnership. (3) To refrain from competing with the partnership in the conduct of the partnership’s business or not-for-profit activity before the dissolution of the partnership. (c) A partner’s duty of care to the partnership and to the other partners in the conduct or winding up of the partnership’s business or not-for-profit activity includes refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law. (d) A partner shall discharge the duties to the partnership and to the other partners under this chapter and under the partnership agreement and exercise any rights consistently with the implied contractual covenant of good faith and fair dealing. (e) A partner does not violate a duty or obligation under this chapter or under the partnership agreement merely because the partner’s conduct furthers the partner’s own interest. (Act 2018-125, §7; Act 2019-304, §1.)

Ala. Code § 10A-8A-4.12 Reliance on Reports and Information.

10A-8A-4.12. Reliance on Reports and Information. A partner of a partnership shall be fully protected in relying in good faith upon the records of the partnership and upon information, opinions, reports, or statements presented by another partner or agent of the partnership, or by any other person as to matters the partner reasonably believes are within that other person’s professional or expert competence, including information, opinions, reports, or statements as to the value and amount of the assets, liabilities, profits, or losses of the partnership, or the value and amount of assets or reserves or contracts, agreements, or other undertakings that would be sufficient to pay claims and obligations of the partnership, or to make reasonable provision to pay those claims and obligations, or any other facts pertinent to the existence and amount of assets from which distributions to partners or creditors might properly be paid. (Act 2018-125, §7.)

Ala. Code § 10A-8A-4.13 Actions by Partnership and Partners.

10A-8A-4.13. Actions by Partnership and Partners. (a) Except as provided in Sections 10A-8A-3.06, 10A-8A-8.06, or 10A-8A-8.07, a partnership may maintain an action against a partner for a breach of the partnership agreement, or for the violation of a duty to the partnership, causing harm to the partnership. (b) Except as provided in Sections 10A-8A-3.06, 10A-8A-8.06, or 10A-8A-8.07, a partner may maintain an action against the partnership or another partner for legal or equitable relief, with or without an accounting as to partnership business or not for profit activity, to: (1) enforce the partner’s rights under the partnership agreement; (2) enforce the partner’s rights under this chapter, including: (i) the partner’s rights under Sections 10A-8A-4.01, 10A-8A-4.03, or 10A-8A-4.04; (ii) the partner’s right on dissociation to have the partner’s transferable interest in the partnership purchased pursuant to Section 10A-8A-7.01 or enforce any other right under Article 6 or 7; or (iii) the partner’s right to compel a dissolution and winding up of the partnership’s business or not for profit activity under Section 10A-8A-8.01 or enforce any other right under Article 8; or (3) enforce the rights and otherwise protect the interests of the partner, including rights and interests arising independently of the partnership relationship. (c) The accrual of, and any time limitation on, a right of action for a remedy under this section is governed by other law. A right to an accounting upon a dissolution and winding up does not revive a claim barred by law. (Act 2018-125, §7.)

Ala. Code § 10A-8A-4.14 Continuation of Partnership Beyond Definite Term or Particular Undertaking.

10A-8A-4.14. Continuation of Partnership Beyond Definite Term or Particular Undertaking. (a) If a partnership for a definite term or particular undertaking is continued, without an express agreement, after the expiration of the term or completion of the undertaking, the rights and duties of the partners remain the same as they were at the expiration or completion, so far as is consistent with a partnership at will. (b) If the partners, or those of them who habitually acted in the business or not for profit activity during the term or undertaking, continue the business or not for profit activity without any settlement or liquidation of the partnership, they are presumed to have agreed that the partnership will continue. (Act 2018-125, §7.)

Source: Alabama Legislature (alison.legislature.state.al.us)URL: https://alison.legislature.state.al.us/code-of-alabamaFetched: 10/20/2026