Steps for Dissolving a Business Partnership
Sometimes business partners no longer want to work together. Perhaps they are involved in a dispute, maybe one of them wants to try a new business venture or is ready to retire, or maybe the business just is not what either partner imagined it would be. Although state law governs partnership dissolution, there are some general steps partners should take no matter where their business is located. The best way to ensure you correctly dissolve your business partnership is to work with a knowledgeable Hoffman Estates attorney from start to finish.
Review Your Partnership Agreement and Reasons for Wanting to Walk Away
If you are thinking about dissolving your business partnership, pinpoint your reasons for wanting to do so and review your partnership agreement with an attorney. Perhaps you and your partner can continue working together if you make a few changes to the partnership agreement. Or maybe dissolution is in fact the best course of action. Issues that might warrant a review of your partnership agreement include:
Your partner is not upholding his or her fair share of the work
You are worried that your partner has lost interest in the business
You and your partner no longer have the same vision for the business
- Your partner has experienced life changes that are cutting into the time he or she has available for the business
A Hoffman Estates lawyer with experience in business and corporate law can help you evaluate the situation and make a decision about whether to revise the partnership agreement or to dissolve the partnership altogether.
Determine the Process for Partnership Dissolution in Your State
If you decide that dissolving your business partnership is in your best interests, you will need to complete the dissolution process and forms as required by state law. In Illinois, for example, a partnership can have a non-judicial dissolution if all partners agree on essential issues, and in the event the partners do not agree, they can petition a court for judicial dissolution. The partners will need to file a statement of dissolution with the Illinois Secretary of State, and as they wind down the partnership, they must use business assets first to pay off any business debts, and then divide the remaining assets in accordance with their partnership agreement. If the business assets do not pay off all business debts, in most cases, each partner will remain personally liable to unpaid creditors. The partners will also need to contact the state revenue department to discuss any potential tax liability and file a final partnership tax return.
Valuing the Business and Other Concerns
During the dissolution process, your business will need to be valued, which often requires a third party. You will also need to carefully review all leases, loan agreements and contracts to determine whether you will be liable on any of them after dissolving the partnership. Additionally, you will need to draft an agreement that outlines the terms of the dissolution.
To ensure all aspects of the partnership dissolution are handled properly and that the dissolution agreement protects you from future disputes or claims, contact a qualified Hoffman Estates attorney for assistance with the entire dissolution process.