Breaking up is never easy, even when you’re talking about a business partnership and not a romance. When you went into your business partnership, you probably never expected it to end until one of you died or retired – but here you are.
How do you dissolve the partnership without things turning contentious (or, worse, litigious)? There are some steps you need to take:
Check your partnership agreement.
This is the very first thing you need to do because many agreements contain provisions for just this kind of scenario. Look for a buy-sell agreement that discusses how shares will be valued, what is permitted to happen to those shares, what conditions permit a buyout and what time limits might be imposed on the process.
Decide if the business can survive
Dissolving your partnership doesn’t necessarily mean that you dissolve your business, but you do want to keep in mind how the operations may work without your partner onboard. You need to think about both the company’s assets and liabilities, as well as any contracts that you may have that are currently unfulfilled. All of this may play into your decision about whether you are going to continue the business in some form or not.
File the appropriate dissolution forms
You can’t just call it quits that easy – there’s always paperwork that has to be done. You need to make sure that you file the appropriate forms with the state to formally end your partnership (and all related legal liabilities). The IRS, too, may need to be notified that your business is changing its formation.
Make sure that all interested parties are notified
You need to let your employees, your investors, your creditors, your landlord and anybody else that interacts with your business know what’s happening. That minimizes the chances of confusion in the future (and potential issues). Once your business partner leaves, you should also update software security systems and passwords in your computers so that you have a lock on all intellectual property and proprietary information.
When you’re facing challenges with your business operations and partnerships, you don’t have to go it alone. Legal guidance can help you make sure that you avoid future litigation and other potential problems.