5 Key Steps in Dissolving a Partnership
Do you know how to dissolve your partnership? If you feel as though you've come to the point in your business where you're ready to wind down and close, it's best to be prepared. Closing a business is not as simple as just ceasing all operations and leaving.
However, dissolving a partnership doesn't have to be too difficult either. Just keep in mind these five key steps when dissolving a partnership:
- Review your partnership agreement. While some partnerships don't require a formal or written agreement, most partners choose to have one anyway for protection. If your partnership has no partnership agreement, then all you need to do is give notice to your partner. If there is a written agreement, you'll need to review it to ensure that you follow the protocol outlined in it -- usually, there's a clause that requires a majority vote of some sort to dissolve.
- Discuss with other partners. It's best to make sure that you and all your other partners are on the same page. This includes discussing particular obligations such as debts and future liabilities. You may want to outline your plan for dissolution in a meeting to ensure that a satisfactory resolution is reached.
- File dissolution papers. While it may not be required, it's a good idea to file a dissolution of partnership form with the state to formally announce and give notice of your partnership ending. Doing so can help you resolve any issues involving further obligations or debts with the partnership.
- Notify others. Make sure you also notify other parties of the dissolution. This includes your landlord, your employees, your customers, and any other government entities (including the IRS) that have registered your business or issued you a license.
- Settle and close out all accounts. Make sure that all your creditors are notified and that your debts are all paid off or settled. Lastly, you'll want to distribute all your assets accordingly (usually in accordance with the partnership agreement, or whatever you and your partners have otherwise agreed upon) and make sure that all relevant bank accounts are closed.
Lastly, don't forget that it's always best to consult with an experienced business lawyer. Because certain rules vary by state, you'll want to ensure that you're upholding all your legal obligations and that all steps are properly taken.