Partnership laws govern the formation, operation, and termination of business partnerships. Partnerships form when two or more persons (or businesses) combine their resources under a single name to accomplish their business goals. Unlike other business formations such as corporations, partners usually share equally in the company’s profits, expenses, and losses. Partnerships tend to be used for smaller business efforts, although many major business activities are the result of partnership agreements.
In some cases, a partnership may need to be terminated for various reasons. For instance, the business may no longer be profitable and may need to close in order to avoid further expenditures, the business may have grown so much that it needs to re-organize as a more expansive form such as a corporation, or the partners may engage in a business divorce. Dissolving a partnership may be necessary, and can occur:
- In writing: a partner may formally withdraw from a limited partnership and terminate their role as a partner. For limited partnerships, this may not lead to dissolution of the organization. For general partnerships, a withdrawal of a partner will usually dissolve the partnership.
- By action: Certain actions may dissolve a partnership, such as a partner terminating their own membership by providing information to a competing organization
- By law: The courts can sometimes impose a dissolution, especially if the organization has been identified with illegal activity
Thus, there are many ways that a partner can signal their intent to have the partnership dissolved. In most cases, there doesn’t need to be a majority vote; if one partner cannot continue, the partnership will usually dissolve as a whole.
Partnership dissolution can lead to many legal disputes. These can include:
- Disputes over partner shares and profits
- Disputes involving the risks and losses incurred by the organization
- Conflicts regarding changes in management and other internal matters
- Issues with copyrights, trademarks, and other protected information.
In most cases, a lawsuit is required in order to settle such disputes. Remedies may include a damages award in order to help compensate a non-violating party for losses caused by a dispute.
Dissolving a partnership can be a complex process. You may need to enlist the services of a qualified business lawyer in your area. An experienced lawyer can explain what you need to do in order to protect your assets and business interests. Also, your lawyer can provide representation in court if you need to file suit regarding a dissolution dispute.