Dissolution of a general partnership is the process of alerting everyone who does business with you and your partners that the partnership is ending and that each partner will no longer be responsible for the debts and liabilities of the others.
Who Can Decide to Dissolve a General Partnership?
A general partnership can be dissolved by any of the partners at any time and does not require that all partners agree upon the dissolution. Usually, the partner who wants to dissolve the partnership will be the one responsible for letting the customers and clients know.
What Events Might Trigger the Dissolution of My General Partnership?
A partnership is automatically dissolved when one of the partners dies, when one of the partners files for bankruptcy, or if something happens that would make continuing the partnership illegal. If the partnership was created for a specific task, it is dissolved once that task is completed.
Other times, general partnerships will dissolve as the result of the retirement of a partner or due to a dispute between partners, especially if that dispute leads to a business divorce. Often a business will experience enough growth that dissolving the general partnership and forming a corporation or a limited partnership will be in the best interest of everyone involved.
What Steps Should I Take to Dissolve My General Partnership?
In order to dissolve your partnership legally, there are a number of things you must do:
- notify state and federal tax authorities that the partnership is dissolving;
- turn in a dissolution and liquidation form to the state in which you do business (this is not always required, but is always a good precaution to take);
- notify all creditors that the partners are no longer responsible for the debts of the others;
- notify all suppliers, customers, and clients of the dissolution
Should I Consult an Attorney Before Dissolving My Partnership?
An attorney with business experience will be able to advise you on whether or not dissolving a general partnership is the right move for your business. A business attorney can also represent you in any business disputes that might arise and help you to preserve your rights as a business owner or partner.