Withdrawing From a Limited Partnership

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What Does It Mean to Withdraw From a Limited Partnership?


In a normal partnership, if one partner withdraws, or leaves the organization, the partnership dissolves. However, the rules are different in a limited partnership.  Because limited partners do not take part in the management of the company, a limited partner can withdraw from his role as partner without causing the dissolution of the entire partnership

A limited partner can also dissolve his role as limited partner if he begins to take an active role in the management of the company, at which point they are no longer limited partners and may be liable as a general partner would be. 

A limited partnership can also be dissolved if a general partner dies, retires, or withdraws from the partnership, unless the partnership agreement specifies otherwise.

What Do I Need to Do in Order to Withdraw My Role as a Limited Partner?

You will often have to file a dissolution form with the state in which the company does business.  Normally, filing a dissolution form with the state will suffice, and you will not have to give notice to the company's customers, clients, or suppliers.  

A dissolution form may or may not require the approving signatures of the company's general partners.  Though the general partners may consent to your withdrawal right away, they may be hesitant to lose your financial contribution.  If this happens, you may consider trying to sell your investment to the other partners or to someone else.  

What if the General Partners Resist My Withdrawal?


If the general partners are unwilling to buy out your interest or if they try to prevent you from withdrawing, the first thing you should do is review the details of your partnership agreement to see what relief may be available to you.  

Withdrawing your role as a limited partner can be complicated, and will often face resistance from the company's general partners. If you are unsure of the agreement's contents, you should contact an attorney with corporate experience.  He or she will be able to protect your rights as a partner or investor and facilitate your withdrawal from the your limited partnership if needed.  

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Last Modified: 05-05-2014 03:04 PM PDT

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