Five years have passed since the events of the first film, and Arthur Bach still enjoys pulling practical jokes on his new assistant, a friendly but uptight man named Fairchild, yet he cannot shake the ache of missing Hobson. Arthur and his wife Linda Marolla Bach learn from a doctor that Linda cannot have children, so they decide to adopt a child from a woman named Mrs. Canby, even as Arthur's growing alcoholism remains a concern.
Arthur is informed by his father that the family company has merged with Burt Johnson, the vengeful father of Susan Johnson, Arthur's ex-fiancée. The Bach family will keep their wealth and lifestyle, but only if Arthur is cut off from his fortune. Burt tells him he can have his money back on two conditions: divorce Linda Marolla Bach and marry Susan. Arthur refuses, as he loves Linda more than his luxurious life.
Now broke, Arthur and Linda move in with Linda's father, Ralph Marolla, and Linda regains her old job as a waitress. Things start well at first, but Burt is determined to make Susan happy, so he buys the building they are living in and forces them to leave. Homeless again, Arthur and Linda move into a squalid apartment, and Arthur tries to sober up to find a job, knowing that bad finances could jeopardize the adoption. After the owner takes pity on him, Arthur finds work at a hardware store, but Burt buys the store and has Arthur fired.
Susan arrives at their apartment and tells Linda that if she truly wants what’s best for Arthur, she should leave him, since Susan can have children. Realizing that Arthur is suffering because he is unwilling to let her go, Linda moves back in with her father and leaves Arthur a note telling him that he should marry Susan and live a comfortable life. Crestfallen at losing Linda and still unwilling to marry Susan, Arthur begins drinking again and ends up living on the streets. At his lowest point, Arthur sees a vision of Hobson telling him that he cannot give up, because he knows Arthur will have a son, and Arthur must be there for him.
Determined to get even with the Johnsons, Arthur sobers up and learns from his grandmother, Martha Bach, that Burt has made many enemies who have dirt on him. Arthur meets with several people whose lives Burt ruined and uncovers a fraud and extortion scheme that Burt was responsible for. He sneaks onto Burt's yacht and confronts him, demanding that they leave him and Linda alone. Burt and his friends laugh at Arthur, freely admitting that the allegations are true, but the statute of limitations has expired and the evidence is worthless. Arthur punches Burt in the gut, and Burt attempts to kill him with a revolver. However, Susan defends Arthur and tells her father to give Arthur his money back or she will tell her mother about his affairs. Burt reluctantly agrees.
Arthur seeks out Linda and tells her that he has gotten his money back and secured the adoption of a child. Mrs. Canby arrives with their adopted child, a baby girl. Arthur is confused because Hobson had told him he would have a son. However, Linda surprises Arthur with the news that she is pregnant. The two return to their home and Fairchild plays a practical joke on Arthur for the first time. Arthur moves Fairchild into a new room, the room that used to belong to Hobson.
