Dissolving a General Partnership

There are a number of reasons to dissolve a general partnership.  Whether business is not going well, you can’t get along with your business associates or you are ready to retire, it might be time to end your partnership.  Before making the final decision, you should consider whether dissolving the partnership is the only option.  Is there any other way to alleviate the problem?  Could you buy out your partner or simply sell your share allowing the business to continue under different management?  Dissolution is generally not a simple process, and if it is your only option, it’s important that you be aware of some important issues that may be present.

Most partnerships operate pursuant to a partnership agreement.  Sometimes, these agreements include provisions for dissolution.  If this is the case in your partnership you should follow these provisions closely to avoid later disputes.  If there is no partnership agreement, you should try to formulate a dissolution strategy with your partner(s).  This might not be possible, especially if the dissolution is the result of a disagreement or personality clashes.  In this case, you have the option to pursue alternative dispute resolution such as arbitration or mediation, as well as the ability to litigate.  Litigation is expensive and time consuming and therefore might not be the best choice.

When preparing to dissolve a partnership you should try to collect all of the money owed to the business and pay any debts the partnership may have.  You should also inform the IRS and the state of the dissolution for tax purposes.  These tax agencies will give you the information you need with regard to taxes.  It is also a good idea to consult with an attorney regarding tax matters as they can result in penalties if not dealt with correctly.

You should also be concerned with making the dissolution formal.  In order to do this, you should apply for a Certificate of Dissolution with the state.  Each state has different requirements and it is therefore a good idea to speak with a qualified attorney regarding this matter.  The benefit of formally dissolving your partnership is that it will protect you from debts and contracts entered into after the dissolution is final.

Depending on the type of partnership you are involved in, different concerns may be present.  Partnership dissolution is not always as straight forward as it may seem.  In order to handle matters appropriately, you should talk to an experienced business attorney.