Starting a business partnership can be a fantastic way to enter the market. However, it could also be easy to get swept up in the possibilities of your business without considering the all the options if a business partnership fails. Entering a partnership does come with its share of risks, just as with opening any type of business. If you and your partner don’t manage these risks, the partnership may end up dissolving. In especially messy situations of dissolving business partnerships, the relationship may experience damage or one partner may bring a lawsuit. It is important to come to certain agreements before entering a partnership to prevent as much bad blood as possible. If your business partnership is dissolving, though, it helps to know what to expect every step of the way.
Dissolving a Business Partnership
When a partnership dissolves, it is not as easy as closing the doors and ceasing operations. Business partners operate together legally and financially in regard to business funds. The partnership will continue until you pay business debts and the two of you distribute the remaining company assets. There are five steps to take when dissolving a business partnership. According to Business.com, they include:
- Evaluating your agreements
- Discussing the dissolution with you partner(s)
- Completing the dissolution paperwork
- Notifying others
- Settling and closing all accounts
These steps provide a general overview of what to expect when dissolving a partnership. It is important to notify all relevant parties and complete the proper paperwork before going your separate ways.
Agreements for Dissolving Partnerships
If in the event you decide you no longer want to run the business, you should have certain agreements in place. These agreements will ensure that the company can be dissolved without creating any additional friction amongst the partners. Additionally, different situations will call for different agreement types. Understanding the diverse types of business agreements will help prevent any confusion in the dissolution. Types of dissolution agreements include buy-sell agreements, new dissolutions, and statement of dissolution.
A buy-sell agreement clearly states who can and cannot buy into the business should you or your partners sell out. A new dissolution is an agreement used when you or a partner want to mutually end the business venture together. This agreement will help decide the terms of dissolving the partnership and establishes timelines for ending the partnership. Lastly, a statement of dissolution is when you and your partners agree on terms of dissolution. Once in agreement, you must then file a statement of dissolution. Filing requirements for this document may vary state-to-state. The IRS provides a checklist of items to complete when filing. It can be found here.
McCune Law Group Offers a Helping Hand if Dissolutions Get Messy
Starting a business venture is not easy. If it comes down to dissolving a partnership that may have fallout, you will need help from a national commercial litigation attorney with decades of experience. Our team can ensure that the dissolution process runs smoothly and fairly if the relationship sours. Let our attorneys guide you through the complicated process of dissolution lawsuits.
Contact MLG by completing the form or calling (909) 345-8110 today for a free consultation!