Business partnerships mean that you and your partners share the profits and losses, marketing and usage rights, and income. The terms of the agreement hinge on a single partnership contract signed and agreed upon mutually by all the stakeholders.
However, the dissolution of partnerships may lead to conflicts, tarnished relationships, and potentially lawsuits.
The good news is you can make the transition process as amicable as possible with the help of a lawyer.
The Critical Legally-bound Signed Agreement
A partnership agreement is a legal document that contains the details of the business and how it operates.
It includes the following items –
- Percentage of ownership held by each partner and other shareholders.
- Partnership tenure – the duration until when the association has for the business.
- Division of profits and losses.
- Non-compete agreements that prevent a partner from abandoning the firm.
- The non-disclosure agreements conceal sensitive business information from the outside.
- Conflict resolution among partners, stakeholders, and employees.
- The formal procedure of dissolution of the partnership or pre-mature termination of the contract.
The contract is valid only if the partner consent to the terms and signs it. So if you want to get out of a business association, the partnership agreement document is where you begin.
Steps to dissolve your partnership
- Review the partnership agreement and look for the protocol mentioned for dissolving the agreement.
- Generally, most businesses agree to vote before initiating the procedure.
- Your contract ensures that you can leave your company legally without violating any terms of business.
- Consult a corporate lawyer to arrange for asset redistribution, income sharing, settle future liabilities, and more.
- You have a legal obligation to your partner to handle business matters before walking out of your partnership.
- Moreover, it is crucial to ensure your partner does not poach your shares, and you place an arrangement for business debts.
- You can approach the state to dissolve your partnership once your personal and professional obligations are out of the way.
- First, you need to file the papers in your business’ state of incorporation.
- Comply with the laws, and if they approve your application, you will no longer be in a partnership.
- Dissolving a partnership essentially means your old business transitions to a new one. Hence, all the independent vendors, contractors, and other relevant parties need the notification. It includes the IRS, customers, landlords, government agencies, etc.
- It is best to pay your debts with your creditors and close all open business accounts before leaving your position.
- You can work with an attorney to settle your liabilities and sort out the entire asset redistribution.
- Your partner can buy out your share to establish a proprietorship.
Call to Action Dealing with the legalities in dissolving a business partnership can be overwhelming. However, you can learn from experts by filling up the form on our website.