Praise be to Allah.
The fact that the partner commits major sins or some other sins does not mean that the partnership is invalid, but if he does other things that could undermine the company, such as dealing in riba or dealing with bribes in the way he runs the company, or he engages in dealings that make the company’s income partially haraam, then this is a different matter. In that case you should separate from him and end this partnership, so that you will not consume haraam wealth or approve of anything that is haraam.
But if his sins have nothing to do with the company, such as if you are accusing him of sins outside of work, such as zina, drinking alcohol, and the like, that has nothing to do with the company or partnership, then this does not affect you and it does not affect the partnership, so long as the business is run in accordance with shar‘i rulings. That does not affect anything, and you have the choice after that as to whether to end the partnership or not, but ending a partnership with this type of person is better, so that you will not be harmed by being close to him. Ending a partnership with this type of person is more appropriate or more prudent, but if it continues for some time, that will not affect the validity of the partnership, because his sins affect him only. Rather what affects the partnership is when the sin has to do with riba, financial cheating or introducing something that Allah has forbidden into the partnership, such as selling or buying haraam things, and engaging in different types of bribery and treachery, or dealing in any type of riba and so on. These are the things that affect and undermine a partnership. End quote.
Shaykh ‘Abd al-‘Azeez ibn Baaz (may Allah have mercy on him)
Fataawa Noor ‘ala ad-Darb, 3/1459.