If one of the members of a business partnership wants to end the relationship, the law prohibits simply closing a company’s doors. Instead, the dissolution of a partnership is required. Dissolution helps to make sure that none of the partners remain liable for the company’s cash flow, debts, taxes, or any other lingering business concerns. Correctly dissolving a partnership, however, can sometimes be difficult. The following will review some of the tips that you can follow to make dissolving a business partnership as painless as possible.
Examine Your Partnership Agreement
Many business partners create specific plans about how the partnership will be dissolved at the time that the partnership is created. If your partnership agreement already contains terms about how dissolution should occur, it is simply a matter of following the terms of the agreement.
Unfortunately, some business partnerships in Michigan do not last for very long. For this reason, it is a wise idea to always have a partnership agreement signed before starting business. These documents have the potential to help make sure the dissolution proceeds smoothly. You can take steps today to ensure that you can dissolve a partnership in case it ever becomes necessary to do so.
Create a Partnership Dissolution Agreement
If a partnership agreement does not contain these terms, however, business partners will need to create a plan for dissolution. It can be particularly difficult to reach an agreement in some cases, however. It is always helpful at this point to obtain the assistance of a corporate lawyer who can help to find a solution agreeable to everyone involved with the partnership.
This agreement will include a number of different details including how you are going to terminate the business to how you will address the various complications that can arise. Once each member of the partnership is content with the agreement, you should all sign the document.
Recognize the Value of Buy Sell Agreements
Sometimes, one of the partners might want to keep the business for him or herself. In these cases, a buy sell agreement can prove to be particularly valuable. A buy sell agreement helps to determine who is able to buy into the business when one of the partners voluntarily or involuntarily leaves the partnership. Buy sell agreements are particularly valuable in protecting partners who are already in the business.
It is important to inform everyone with whom the partnership does business that the dissolution is occurring. This includes distributors, suppliers, other companies, etc. These notifications emphasize that once the partnership ceases to exist, none of the partners will liable for any debts that were incurred by the partnership.
Speak with a Business Lawyer Today
There are a number of complex steps involved with ending a partnership. Many business owners find it helpful to obtain the assistance of an experienced attorney to navigate these issues. Contact Resnick Law to obtain the assistance of an experience corporate law attorney who can help you navigate the dissolution of your business partnership.
(image courtesy of Luke van Zyl)