No matter how you reach the decision to dissolve a partnership, the process can get messy quickly, particularly if you or your partner do not have a strong grasp on how to execute the dissolution. Unlike other types of businesses, partnerships often involve much less documentation, and sometimes don’t even require a written agreement to be legally binding.
Before you simply declare the partnership ended, be sure to examine all the issues at hand, to keep your rights and priorities protected if and when the process takes a turn and becomes complicated. With proper planning, you can end your partnership with finality, but if you cruise through the dissolution without taking care to cross the t’s and dot the i’s, you may find that it still presents problems for months or years afterward.
Do you have a partnership agreement?
If you created a partnership agreement when establishing your venture, then it is important to review it carefully to determine what guidelines, if any, you laid out for dissolution. Typically, a partnership agreement contains at least a cursory description of how partners intend to end the arrangement, so make sure you clearly understand these terms.
If some aspect of the dissolution terms is no longer relevant, you must make sure that you address it properly instead of passing it by. It may take a bit of negotiation between partners to reach a fair compromise if the agreement is unclear. If you do not have a written partnership agreement, then you only need to give the other partner notice.
If you had any assets and liabilities in the partnership, then you need to make sure you understand your role in resolving these. Often, closing a partnership means dealing with outstanding balances to other parties like vendors and subcontractors, so don’t close the doors legally until you have a clear path to dealing with them. If you fail to properly address outstanding accounts, you may find yourself hounded by creditors long after the partnership closes.
It is also wise to file proper dissolution papers. While not necessarily required, if there is any reason someone may come looking for your partnership entity, official dissolution ties up several loose ends. Whether you file dissolution papers or not, you should also contact any other parties who may depend on you and inform them that you are closing down.
You should also make sure to notify any government entities that issued you licenses, such as the IRS, to avoid later complications.
Protect yourself sooner rather than later
Depending on the nature of your partnership, you may have a much more complicated process ahead of you than you realize. Be sure to use high-quality legal resources from a contract lawyer Frederick, MD offers and guidance to ensure that you address the potential complications ahead of time. Otherwise, you may find that some aspect of the partnership simply will not go away, which may end up costing you dearly. A strong legal strategy helps ensure that you understand your options for protecting yourself and your priorities while fulfilling the legal requirements for full partnership dissolution.