Operating a successful partnership often depends on knowing when it is time to step back and let the partnership dissolve. If you know that it is time to end your partnership, it is wise to understand some important aspects of the process, whether it is a small venture with few assets and liabilities, or a more complicated arrangement.
Choosing to end a partnership is similar to ending a marriage. The agreement that you set in place at the beginning of the partnership has a great deal of influence over how the dissolution progresses. It is often much more complicated to get out of partnership than to get into one.
Before you move forward with dissolving your partnership, make sure that you consider your circumstances through the eyes of the law. This ensures that your rights remain secure and the partnership is truly over when you finish.
Understanding your partners’ expectations
Part of what makes any relationship work well, whether personal or professional, is a clear understanding of each party’s expectations. If you understand each other’s expectations at the beginning of a partnership, the dissolution is much easier.
If you find yourself separated from your partner over a significant disagreement, it is always wise to review your partnership agreement. Much like a prenuptial agreement, a partnership agreement can help guide the dissolution of a partnership and clearly lay out what each party must receive or surrender.
Once all parties review the partnership agreement, you can use it as a common basis for negotiating toward fair, acceptable terms. The more detailed your partnership agreement is when speaking about the dissolution, the easier it is to resolve conflicts by going back to the original agreement. If one or both of you has significant grievances against the terms of the agreement, you may want to consider professional legal counsel.
Turning off the lights, for good
Once you agree on how to dissolve your partnership, you must file dissolution papers with the proper authorities. Typically, this includes the IRS and any other agencies or boards that issued your partnership its licenses. You must also inform the parties affected by the closure of the business, including employees, clients, and possibly other businesses that your closure may impact.
If you have any outstanding debts, now is the time to settle them. If you find that you cannot settle them, be sure that you consider this as you build a legal strategy to keep yourself protected. Partnerships are easy to establish, but leave individual partners holding a great deal of personal risk. Be sure that you have a clear plan for achieving your goals. Keep your rights and priorities protected with a strong legal strategy using all the legal tools you have at your disposal.