What Do You Do When Your Business Partner Wants to Part Ways?

A partnership consists of two or more partners. If a partner leaves the partnership, its dynamics can change, impacting other partners, and the business.


If there are only two partners in a partnership, one person leaving will dissolve the partnership. In the case of a multi-member partnership, a partner with the majority of clients of the business quitting could end the partnership.


Reasons to Dissolve a Partnership


Some common reasons partnerships dissolve are:


  • A partner retires or resigns from the partnership
  • A partner gets a court order to dissolve the partnership
  • A partner becomes mentally or physically incapacitated and is no longer able to perform their duties
  • A partner passes away
  • A partner buys out other partners’ share and transforms the business into a sole proprietorship
  • The partnership files for bankruptcy
  • Partners agree to dissolve the partnership
  • If a partnership is formed for an illegal purpose or conducts illegal activities, a court can pass a decree to dissolve it


Make Sure the Partnership Agreement Covers All the Bases 


When entering into a partnership, you and all your partners must assume that the partnership will break up at some point. Working under the assumption that the partnership will not last forever can make a partnership break-up much easier, if it happens.


Hire an experienced and skilled business attorney in Santa Rosa to create a partnership agreement. Your partnership agreement must clearly define the role and responsibilities of each partner.


It must detail partner rights, partner contributions, and the management structure. Make sure the agreement covers important topics such as how losses and profits will be allocated and who has the authority to make decisions. The agreement must also contain terms related to the exit, death, and incapacity of a partner.


Preparing to Dissolve a Partnership


A well-drafted partnership agreement details steps that partners need to take to dissolve the partnership. If terms related to dissolution are not included in the agreement, state law will dictate how to dissolve the partnership.


Common steps involved in ending a partnership:


  • Partners formally vote to dissolve the partnership
  • Arrangements are made to pay partnership debts and liquidate property owned by the partnership. Profits are distributed and tax returns are filed
  • Important documents are filed with the respective authority to formally dissolve the partnership


Tips to Make the Process Efficient and Less Costly


  • Work with a business attorney in Santa Rosa to develop an in-depth understanding of your rights and responsibilities
  • Pay all partnership debts before distributing assets
  • Inform creditors
  • Keep communications with your partners open and honest


Are you feeling trapped in your partnership, and want to dissolve it legally? The Law Office of Stephen M. Beckwith can help! Stephen Beckwith has decades of experience. His success rate speaks for itself. To consult him, call (707) 526-5454.