Partnership Dissolution
After dissolution, the partnership legally changes. The business may continue under a new partnership.
You can get a shareholders list from the company. A partnership can continue after dissolution until terminating the business. Dissolution legally changes the partner relationship caused by a partner leaving. It does not necessarily end the partnership.
If a limited liability or general partnership, a partner cannot sell without consent.
Dissolution Conditions
A partnership can dissolve when:
- The partnership term expires
- Partners mutually agree
- A partner withdraws
- A court decrees
If one partner leaves, the remaining partner(s) can continue the business.
Partners should agree on exit terms, especially for equity partners who own part of the business. This can cover treatment of assets if a partner leaves or the partnership dissolves.
If Abernethy and Chapman dissolve their partnership, the business property and right to profits can be conveyed to a new partnership, such as with Miller.
After paying debts, remaining partnership assets go first to partners owed money by the firm, then to return capital contributions, and finally split between partners.
To remove your name, you can file paperwork with your state.
Continuity or Termination
What happens to a partnership when one partner leaves? The partnership agreement and state laws govern what happens. Review your partnership agreement, then relevant state laws if needed.
A partner can withdraw voluntarily or face expulsion. Withdrawal means serving written notice to end involvement. Expulsion is the remaining partners forcing out a partner.
If the partnership continues, remaining partners can buy the exiting partner’s interest. Or the exiting partner’s interest can transfer to an heir or purchaser. Without an agreement, assets and debts split equally among partners.
An agreement should outline buyout terms, including calculating the exiting partner’s share. This often involves book value, liquidation value, or a preset formula.
With dissolution, remaining partners can wind up business affairs then continue a new partnership. Or they can terminate the business after paying debts and distributing assets.
A written exit agreement protects all partners and the business. It details departure terms for scenarios like a partner dying, departing voluntarily, or a dispute. Periodic reviews help keep things current if partners or situations change.