01 Oct How to Dissolve a Business Partnership
Business partnerships can be great, but to dissolve them can be another story. When you’re first establishing a business with one or more partners, it is easy to overlook important legal agreements before diving into your new venture. However, as promising as your future looks when you’re starting out, it is imperative that you and your partner have a partnership exit agreement.
It is important to note that the dissolution of a partnership can be due to a variety of reasons, including the death of a partner, selling out or one partner deciding to move on from the business. A written agreement will protect each party involved.
If you must dissolve a partnership without an agreement, you default to state rules. The Ohio Uniform Partnership Act sets the legal requirements and obligations for partnerships. If you’re dissolving a partnership without a written agreement, you must follow state rules. Often, this means ending your business, even if one partner would like to continue the venture. Having a partnership exit agreement can prevent any complications that may arise during the dissolution of the partnership.
If you do have a partnership agreement and think it is time to dissolve your partnership, there are a few important steps you must take before it becomes official. Before the dissolution begins, you should review the terms of your partnership exit agreement and follow the protocol outlined in the legal document.
You and your partner should be on the same page before beginning the dissolution of the partnership. There should be a forthright conversation where you discuss any business debts, important obligations and how you will end the business if you choose to do that.
Next, a dissolution of partnership form should be filed with the state. This formally declares the end of the partnership, and is a good protective measure to take during the process. After you file the proper paperwork to make it official, you should be proactive and notify any parties that will be directed affected by the dissolution. This includes employees, clients and customers, government entities like the IRS, and other stakeholders.
Finally, if you are closing the business along with the dissolution of the partnership, there are a few extra steps you need to take before closing. All debts need to be settled. Additionally, bank accounts should be closed, assets should be properly distributed, and all creditors should be notified. This should all be done by the terms spelled out in your partnership agreement.
While you may not think it is important when first establishing your business with a partner, having a legal document is crucial to ensuring the success of your new venture.
In closing, it is important to hire an attorney to handle the many nuances that accompany the dissolution of a business entity. You should always consult an attorney when you undertake this process. If you have any questions, please contact Kasunic Law for guidance.