Dissolving a partnership can be challenging. Reviewing your partnership contract and knowing what legal options are available is important.
Whether due to irreconcilable differences, changing business goals or other reasons, taking the right steps is crucial when considering the dissolution of a partnership. Some of the options available are found here.
1. Negotiated dissolution
In many cases, partners can reach a mutual agreement to dissolve the partnership through negotiation. This involves open communication, discussion of the terms of dissolution and agreement on issues such as asset division, debt settlement and responsibility for ongoing obligations. Negotiated dissolution can be cost-effective and amicable if partners are willing to cooperate.
A buyout can be the best option if one partner wishes to continue the business while the other wants to exit. The partner interested in keeping the business can buy out the other partner’s share by paying a lump sum or agreeing on a payment plan. A fair valuation of the business and its assets is crucial in determining what should be paid.
When partners find it challenging to come to an agreement on dissolution terms, mediation can help. With this option, a mediator, who is a neutral third party, will help those involved reach an agreement. Mediation can provide a structured, conflict-free environment for partners to work through their differences and find solutions.
4. Legal action
Legal action may be necessary if partners cannot reach an agreement or legal disputes are involved. This typically involves filing a lawsuit to dissolve the partnership and handle any outstanding issues through court proceedings. Legal action can take more time and money than the other options, but it may be the only recourse if the partners cannot find a solution.
Dissolving a partnership can be challenging. However, when you know your legal options, you can work to dissolve the partnership and ensure both parties are satisfied with the outcome.