Forming a business partnership is much like deciding to marry, though they each have very different long-term goals. Both are contractual relationships that require specific steps in order to bring them to an end. Ending a business partnership is not necessarily an acrimonious process — in fact, it may represent the introduction of a new phase in the business relationship, such as expanding the business into a corporation. Whatever the purpose, you need to make sure that it is done properly and legally.
A well-crafted partnership agreement will already contain specific language regarding the dissolution of the partnership, and if that applies in your situation then you can simply follow those terms. But if that eventuality was not anticipated and terms were not included (or no formal partnership agreement existed), things become more complicated. There is much that needs to be discussed, including how existing debts and obligations should be addressed, as well as any agreements or contracts to which the partnership is obligated. Additionally, there are state business laws regarding partnerships that need to be followed. Though you may be able to extract this information from the state’s website, consulting with an attorney will provide you with the most certainty that you are pursuing the right path and addressing all of the issues that need to be addressed, the forms that need to be filed, and the fees that need to be paid, as well as the cancellation of applicable permits, licenses and registrations, notification to local, state and federal tax agencies, and cancelation of any contracts, leases or agreements.
In addition to taking care of state and internal obligations, you will also be required to give appropriate notice to stakeholders, most notably your suppliers, your customers, and any creditors. States frequently require publication of this notice in a local newspaper, but it is also highly recommended that direct notification is provided as well. Doing so ensures that all involved are aware that the partners are no longer responsible for any previously existing obligations that may have been entered into, or that are being anticipated.
Finally, any bank accounts that are linked to the business partnership will need to be closed after outstanding debts have been paid, with all involved being reimbursed for whatever balance remains that they are owed.
As you can see, even business partnerships that begin with a handshake require extensive legal work to bring them to an end. To ensure that it’s all done correctly, contact our office today to set up an appointment.