When Business Partners Go Their Separate Ways
Some business partnerships — like marriages — do not last forever. How you manage the split can mean the difference between exiting as friends or losing money, clients, resources and assets. Protect your interests and investment to come out as whole as possible at the end of the process.
Severing a business partnership
Business co-founders split for different reasons. A partner may move or retire. Business interests may deviate. Personalities can clash. The business may not be profitable enough. “Divorcing” business partners have three choices:
- One partner can buy the other out
- Both partners sell to a third party
- The business is dissolved
If you created a partnership agreement with a dissolution strategy —similar to a prenuptial agreement — the breakup should be simple. If you do not have one, keep your separation negotiation on a professional, non-emotional basis by securing legal representation for each partner.
The legal process for rendering a partnership agreement null and void begins with a thorough review of the business to:
- Determine that all committed duties have been completed
- Chart business assets and liabilities
- Review all leases, contracts and loan agreements
- Evaluate property, business and employer tax liabilities
- Establish the ownership of any intellectual property
Either both parties have their own independent valuations or you agree to abide by the evaluation of an independent expert. The review forms the basis for the terms of separation. It also protects you against responsibility for your partner’s debts and liabilities and any future disputes or claims.
A business law attorney documents your separation agreement and the purchase or sale of securities. Outstanding obligations and partners who are creditors are paid from the remaining assets. Anything left over is distributed according to the partners’ agreement. Notify your state’s department of revenue so that taxes are not automatically assessed. Cancel any registrations, permits, licenses and business names. Advise suppliers, customers and the authorities about the partnership’s dissolution.
A knowledgeable business law attorneycan guide you through every step of severing a partnership. It usually takes 90 days from filing a statement of dissolution for it to be final.
Contact the D.C. business lawyers who provide experienced guidance
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