Business Litigation Defense
Wednesday, November 14, 2018
Business partnerships, like marriage, do not always end as planned. Some business relationships work as well as one may hope and the business thrives. Others become contentious and partners realize it is best to go their separate ways.
Which leads to one big question — how do business partners dissolve the partnership?
Partnerships are generally legal relationships. These are business structures that result from drafting various legal documents. Although it is not wise to simply walk away from the partnership, there are ways to end the business relationship wisely. Three examples include:
- Buy out a partner. One option involves buying out a partner’s interest in the business. This process generally involves the need for a business valuation before negotiations can move forward. Ideally, the business partnership agreement will include a buy-sell agreement. This agreement should provide guidance on how to move forward. If an agreement is not present the partners would need to agree upon an acceptable process before moving forward.
- Sell to a partner. In contrast, you could use the same process to sell your share to your business partner.
- Dissolve. You and your business partner could also agree to dissolve the business. This process generally involves drafting a dissolution agreement and then following through with the terms outlined in this agreement.
It is important to note that additional legal issues can arise during the dissolution of the partnership agreement. Tax obligations are one example. As such, it is wise to seek legal counsel experienced in the termination of partnerships to help navigate the process and mitigate the risk of surprises.