A general partnership is a business arrangement between one or more individuals. The purpose is to jointly own a business structure together along with its assets, profits and liabilities. The partners in this circumstances can agree to an unlimited liability. This means that their personal assets may be liable to the partnership’s legal and financial obligations. They may also agree to a limited liability partnership.
The general partnership must meet the following requirements:
- It must consist of at least two or more people;
- All partners must agree to any liability the partnership may face; and
- A written formal partnership agreement is ideal but the oral ones are legally valid too.
- How Do I Dissolve a General Partnership?
- How Do I Incorporate the Partnership Dissolution Agreement?
- What are the State Laws Regarding Dissolution of General Partnerships?
- What Other Matters Need to Be Considered After the Dissolution of a Partnership?
- Should I Hire a Lawyer for Help Dissolving a General Partnership?
Partners may decide to dissolve a general partnership for many reasons. It does not necessarily mean they do not want to continue doing business together. It is crucial to dissolve the general partnership properly to ensure that the liabilities are ended in accordance with the partnership agreement.
Generally, it is advised to include a general provision regarding dissolution in the partnership agreement. It would specify the procedures to take in order to dissolve the partnership. Having this provision in the agreement makes matters much easier to resolve in the event of a dissolution. Therefore, it is recommended to include the terms for dissolving the general partnership in the agreement.
However, not all partnerships have a dissolution provision in the agreement. There are several options available if this describes the situation you are in. First, you and your partners can hold a meeting to decide the terms of dissolution together to ensure that all partners are on board. If this does not work you can hire a third party to mediate the issues. Lastly, if there still seems to be no agreement you can get the court involved and request for an order on dissolution.
The parties drafting the partnership dissolution agreement should clarify the procedures needed to divide the liabilities. This can ensure that there is little to no room for misunderstandings. It would be useful to seek out a lawyer to assist in the drafting process. Before signing the agreement, it is important to make sure all the duties and obligations have been agreed upon under the provisions of the partnership and no obligation remains outstanding.
Each state varies on the method of dissolving a general partnership. It is crucial to research the local state business laws to adequately dissolve your partnership. The dissolution of general partnership is governed by state laws therefore, depending on the state you reside in, the procedure of dissolution will differ. The dissolutions are handled by your state’s Secretary of State office. The office will be useful in determining the applicable rules, fees and forms for a dissolution of a general partnership.
Most states require a formal statement to be filed for the dissolution. In some states this is also known as a certificate of cancellation. Additionally, there is a set time period of submitting this form to be properly processed by the office. Besides, completing the right paperwork for the dissolution you need to notify your clients to inform them about your decision of ending the business. You would also need to contact your suppliers and customers to publicly announce that your company is no longer in business and the partnership ended.
You would need to cancel licenses, permits and registrations that were handled under the partnership to ensure that it is ended. The creditors should also be notified and their accounts be taken care of. Furthermore, you would need to properly file all the remaining tax documents and inform the federal, state and local tax agencies that your partnership has dissolved. Any contracts, leases and agreements under the partnership should also be terminated to ensure that there is no outstanding obligations under any of them.
The leases or contracts can create issues if not handled immediately. Closing all the bank accounts associated with the partnership can ease the dissolution process. Following these steps will ensure that you will not have any liabilities remaining after completing the tasks to dissolve your partnership.
If you are currently in a partnership and would like to dissolve the partnership seeking a lawyer is helpful to ensure that it is adequately done. Furthermore, closing the accounts and distributing the remaining assets after paying the debts can create conflicts especially if there is no partnership dissolution agreement.
Therefore, with the assistance of a general corporate lawyer, it may be useful to draft one in your current partnership incase a future event arises that requires you to dissolve your company.