Business Partnership Advisor
Together, we can fix your business and partnership problems
Chris Reich, Business Luminary
How to End a Business Partnership by Agreement
You and your partner agree that it’s time to quit. Here are the steps to dissolve your Partnership and LLC.
Is It Time to Quit?
Dissolving your partnership and or folding your LLC is a big move. Be certain that you and your partner are clear about this decision. If you can no longer work together or if the business can no longer sustain itself, then yes, it’s time to close shop. If there is a chance that you may keep the business operating, get advice from a good business consultant (call me!) before finalizing your plans. A couple of hours consulting time won’t cost much and could save your business.
All Partners Agree?
If your partner (or a partner) wants to continue the business, pay attention. I would ask, “why?” If the business is failing, why would a partner want to go on? It may be that she sees hope where there is none. That’s okay but you need to protect yourself should the business fail later.
Don’t ever just agree to walk away from a partnership. You are still responsible for debts, taxes, and other obligations until you have formally withdrawn from the partnership and been cleared by all creditors.
If it is time to dissolve your partnership, follow the steps or you could get a nasty surprise later.
Chris Reich, Business Partnership Adviser
Sign a Declaration of Dissolution of Partnership
You need to draft or obtain a document which clearly states that the partners intend to dissolve the partnership. If you have an LLC, there are forms for this. Consult your State’s Secretary of State site.
Deal with Obligations (Creditors)
Just because you have decided to quit does not mean the debts go away. You must satisfy open debts unless you are filing bankruptcy. Pay off credit cards, vendors, suppliers, and employees. Set aside some money for taxes. Then, review your lease. Depending on the lease and the landlord, you may have to pay off the balance on your lease. Some landlords will work with you on this so approach this gently. In one case I was able to find a new tenant for my client and his landlord was thrilled to have everything worked out.
File with the State (LLCs)
As mentioned earlier, you might need to file a notice dissolving your Partnership with the state. All LLCs must file, but few states require that a general partnership file anything.
You may have to put a closure notice in your local paper. If the debts are satisfied and there are no complications, you probably won’t have to run anything in the paper.
That’s it. You can have your tax preparer file all the final taxes and you’re done.
Chris Reich, TeachU
“If you must close your business and dissolve your partnership or partnership LLC, take good care of yourself. You may experience a deep depression or profound sense of loss. You are not a failure. Business is tough. I respect anyone with the courage to try.”
Buyouts between partners are usually mired in things that people think are legal entitlements. Let’s look at the most common misconceptions around buyouts.