Protecting Your Interests in a Partnership Dissolution
When two or more people decide to enter into a business partnership, they often do not realize what challenges are involved in running a business with someone else. While business partnerships can be crucial to the growth of your business, the business world can be tough and ruthless, which is why things do not always work out as planned. When a partnership is dissolved, there are important steps you should take to protect your interests and avoid or mitigate personal liability.
If you are considering a partnership dissolution, our attorney at Coppaken Law Firm can help. We can guide you through the process and plan for a secure future. We have offices in Bucyrus and Overland Park, Kansas, but serve also business owners and partners in Kansas City, Missouri, and throughout Johnson and Jackson counties.
Common Reasons for Dissolving the Partnership
When starting business partnerships, people rarely make plans for the possible dissolution of their partnership without realizing that not all partnerships are made to last. When partners no longer want their partnership to exist, they can initiate the partnership dissolution process.
Partnership dissolution involves the formal termination of a business partnership and the settlement of its affairs. Dissolution of a partnership may occur for a variety of reasons, but some of the most common ones include:
The business becomes unsustainable.
One of the partners retires or dies.
The business has been seeing declining revenue.
Strained relationships or disputes between the partners.
Partners have different visions for the future of the business.
Lack of transparency or communication in the partnership.
Disparity in contributions among partners.
When any of these factors exist, partners may decide to legally end their business partnership through the dissolution process.
The Process of Partnership Dissolution
In most cases, the partnership dissolution process follows these steps:
Reviewing the partnership agreement. Partnership agreements often contain provisions for the possible dissolution of the partnership. These agreements are legally binding, which means partners must abide by the terms specified in them to avoid legal repercussions. Since partnership agreements are written in complex language, you want to have an experienced attorney review the agreement for you.
Discussing the dissolution with your partners. Clear communication is key to a smooth and hassle-free dissolution of a business partnership. Communication between partners is even more crucial when there is no partnership agreement or the agreement does not contain provisions for the dissolution. When partners agree on the terms of dissolution, they can avoid the legal challenges and disputes when dissolving the business. Assistance from an attorney is necessary to facilitate the communication between the partners.
Filing the appropriate forms and drafting a dissolution agreement. The partners may need to file a dissolution form with the state government and also create a dissolution agreement. The purpose of the agreement is to outline how the partners’ commitment will be terminated and how their business assets and liability will be divided when the partnership is dissolved.
Winding up the affairs. Once the necessary dissolution paperwork has been prepared, the partners can proceed to winding up the affairs, which involves closing their shared bank accounts, settling the debts, and distributing the remaining assets among the partners.
Sometimes, partners may not be able to agree on the terms of dissolution without court involvement. However, going to court should be the last resort as litigating partnership-related disputes can eat into the business’s assets. It is vital to talk with a skilled attorney to discuss alternative dispute resolution methods available when dissolving your business partnership.
Things You Can Do to Protect Your Interests
It is important to have your best interests in mind when dissolving a business partnership. If your partnership is on the verge of dissolution or you are already in the middle of ending your business partnership, there are certain things you can do to protect your interests:
Seek legal guidance from an experienced attorney to assist you with all aspects of partnership dissolution.
Read the partnership agreement and other documents to know what to expect.
Notify your clients, customers, and suppliers of the partnership dissolution.
Review all existing business contracts and consider how to mitigate the negative impact of the dissolution on them.
Sit down with your attorney and prepare dissolution papers.
Close all joint accounts and resolve financial affairs.
No two business partnerships are exactly alike, which is why the strategies for protecting an individual partner’s interests may differ from one case to another. Consider contacting a skilled business dissolution attorney to discuss your options to protect your interests and avoid potential personal liability when ending your business partnership.
We Fight For Our Clients
If you are considering dissolving your business partnership or the dissolution process has already begun, contact Coppaken Law Firm. Our attorney can help you navigate the key decisions in the process to ensure that your interests are protected. We provide solutions tailored to the specific needs and goals of our clients in Overland Park, Kansas, as well as Kansas City, Missouri, and surrounding areas. Get in touch now to get started.