There are few professions where the use of precise language is as important as it is in the law. Though two words may seem interchangeable to the layman, an attorney understands that there are important nuances that distinguish one from another. Such is the case with the terms “dissolve” and “terminate” in the context of a business partnership. While both words are concerned with the end of a business partnership, dissolution refers to the process itself, and usually to the departure (or death) of one or more individuals from the entity, while termination refers to the cessation of all operations, including the disposal of all assets.
To understand why different terms are used, it’s important to remember that a business partnership is a collaborative effort involving more than one person. If one of those people dies or wants to leave the business, or other partners want to oust them, the partnership will be dissolved but the business will continue to operate until all of the legal actions needed to bring it to closure have been completed. It is only at that point that the term ‘termination’ can be used. It’s like the difference between planning a wedding and getting married — you only actually get married on your wedding day, but you could casually say that you’re getting married throughout the planning process.
There is one other aspect of business partnerships that should be included in a conversation about terminology, and that is ‘withdrawal.’ Withdrawal from a business partnership describes having one or more partners leave the partnership but allowing the business to continue operations. In that scenario, assets need to be transferred in order to make sure that the business’ assets are appropriately redistributed.
Business partnerships start out with the best of hopes, and they can end on a positive note too. The best way to minimize animosity and avoid an adversarial process is to make sure you’ve addressed all potential issues at the start through the crafting of a comprehensive partnership agreement. An experienced business law firm will ensure that all potential scenarios are addressed so that clear answers already exist for every situation that arises. For information on how our attorneys can help you, contact us today to set up a time for us to meet.