A business partnership is much like a marriage: partners manage money, make joint decisions, and communicate about numerous daily issues. Most of the time both married and business partners believe the relationship is forever, but that’s not always the case. So while a divorce is a way to end a marriage, how do you end a business partnership?
What are the reasons to end a business partnership?
There are several reasons a business partner may opt to leave the partnership. Sometimes ending a business partnership is easy because partners have agreed to an amicable split, while other reasons are contested and present more of a challenge.
A partner may wish to leave the business because he or she is ready to retire, take another job, or for other reasons. In these circumstances, most of the time, the other partner will likely support the split and all that remains is determining how to wrap up the partnership.
However, if one partner wants out of the business because the partners cannot agree, or if the other partner engaged in inappropriate or illegal activity, a contested departure may result, making it difficult to reach a fair resolution.
An attorney will ensure the best way to end the partnership with minimal disruption to the business. He or she should make sure that you receive your fair share of the business’s assets and that you aren’t held accountable for obligations for which you are not responsible.
How will an attorney help you dissolve a business partnership?
If you entered the business with a partnership agreement, an attorney will review the agreement and develop an exit strategy. If you don’t have an agreement, you should provide the attorney with contracts, promissory notes, leases, account statements, mortgages, and other documents so that he or she can work with you to develop the best way to dissolve the partnership.
If you haven’t already, you should discuss your intentions to leave with your business partner. If you are leaving due to conflict or for another contested reason, your attorney may inform your partner of your decision to terminate the partnership.
What is a separation agreement?
After gathering information, an attorney will draft a separation agreement (if terms of separation aren’t listed in the initial partnership agreement).
The agreement should address the value of and what happens to the partnership’s assets and liabilities. It should also include how the partner is compensated for his or her ownership interests, how the partner’s name will be removed from obligatory documents, who is responsible for debts (including taxes), and more.
If business partners cannot resolve the terms of dissolution, they may be required to take the matter to court.
Ending the partnership
After the separation agreement is final, the partners will need to carry out its terms by paying debts, selling or refinancing assets, renegotiating contracts, paying taxes and buyout amounts, and more.
Business owners should notify suppliers, clients, and others of the change as a way to protect themselves from liability.
Help is available
The attorneys at O'Reilly Rancilio are ready to assist you with matters related to business partnerships. For more information, please visit our website or call 586-726-1000.