When you finally make the decision to move forward with starting a business, you and your business partner may have vigorously shaken hands, hugged and celebrated your coming venture. Over the years, you and your partner may have established a thriving company and met many of your business-related goals. However, times change, and the desires of individuals change as well.
You or your partner may have reached a point where continuing on as a partner in the business is no longer the desirable course of action. If you established your company as a partnership when you chose your business structure, one partner leaving could mean that your enterprise needs to dissolve. If you or the other partner wants to continue the business alone, changing the structure to a sole proprietorship or other entity may be necessary.
Dissolving a partnership
When it comes to ending a partnership, it is important to know that the partnership will first need to dissolve and then be terminated. Hopefully, when your business first started, you created a partnership agreement that addressed the possibility of dissolving the partnership or having one partner withdraw. If so, you can follow the procedures outlined in that agreement to help the process and transition go more smoothly.
When dissolving the partnership is its entirety, you will need to notify the proper outside parties of the changes to your business. For example, if you registered your company with the state of New Jersey, you will need to follow state regulations for dissolving and ultimately terminating the partnership. Some steps involved with this process include the following:
- Filing a certificate of dissolution with the Secretary of State
- Filing the necessary tax returns and paying applicable taxes
- Handling any outstanding debts
- Allocating remaining assets to the respective partners
Though terminating a business partnership may be necessary, it can be a tricky process to complete.
Doing it right
You and your business partner certainly do not want anything to get in the way of ending the partnership as easily as possible. As a result, you may want to ensure that you have legal counsel throughout the process. Your attorney can advise you on the steps necessary to dissolve and ultimately terminate the partnership and how you can move forward with the business afterward if it is your wish to do so.