A business partnership is a legal entity that’s formed when two or more individuals intend to move forward as co-owners, with the goal of turning a profit. Though it is good practice to have this intention memorialized through a legal document known as a partnership agreement, it is not required. Unfortunately, those who opt for a handshake rather than documentation can run into trouble down the road, and particularly when one partner decides that it is time to dissolve the entity.

There are many reasons why one partner may want to walk away from the business. Though disputes are often the catalyst, that is not always the case. A partner may become disabled or may die. They may simply decide that it’s time for them to retire, or the business may have grown to the point where incorporation is a better operational model. Whatever the reason given – and even when no reason is given at all – if there is a partnership agreement that spells out the process of dissolving the partnership or allowing one partner to leave, then the process can move forward smoothly. Without such an agreement, terminating the legal relationship will require more attention.

One of the first questions that need to be asked is whether the intent is to terminate the entire partnership or simply to allow one partner to walk away. The latter is known as disassociation, and can be accomplished by buying out the dissociating partner’s shares in the business. If, however, the goal is to terminate the entire partnership, it’s known as a dissolution process, and this is done by a single partner providing notice of dissolution. Once this notice has been provided, as long as the business has no bankruptcy petitions pending, the partnership is required to go through a process of stopping all business activities, distributing assets, and paying off liabilities.

Whether you are a partner who is interested in walking away, or you are involved in a partnership entity that you’re trying to preserve, seeking legal guidance specific to your situation is the best place to move forward with this complex and often upsetting scenario. For help, contact our experienced business partnership attorneys today to set up a time to talk.