How To Dissolve a Business Partnership the Right Way
Posted by: Copenhaver, Ellet & Derrico
Sometimes in business, things fall apart. That is as true for business partnerships as it is for anything else. And when business partnerships have run their course, they need to be dissolved so the parties can move on.
No matter the reason, if you decided to part ways with a business partner in Virginia, it is essential to make sure that you are legally covered. This benefits you, your former partner, and the business. To explain this process, our Roanoke business attorneys discuss how to dissolve a business partnership in Virginia the right way.
Legal Reasons To Dissolve a Partnership
You cannot merely decide a partnership is over and leave it. As much as we all would like to have that kind of freedom, the law protects specific actions within business partnerships to ensure no one can cause undue harm to someone else in the partnership.
With that said, what are the legal reasons to dissolve a partnership in Virginia? State law outlines the following reasons a partner can apply to dissolve a partnership, among others:
- Unreasonable Frustration: The financial purpose of the partnership is likely to be “unreasonably frustrated.” If the partnership’s purpose is to form a profitable business in five years and that is not happening, then the purpose could be considered unreasonably frustrated.
- Partner Conduct: A partner has done something related to your business partnership that has made a continuing relationship difficult, if not impossible.
- Agreement no Longer Makes Sense: The partnership agreement has laid out terms that are no longer reasonable to carry out as a partnership.
These are all reasons why one partner could ask to dissolve a business partnership in Virginia. The dissolution of the partnership in these cases may be against the other partners’ will.
In situations in which all partners want to dissolve the partnership, doing so is a lot easier. Virginia law outlines the following reasons for dissolving a partnership when all partners agree:
- The partnership was planned for a specified time that has now passed
- One of the partners has died within the past 90 days
- All partners express their desire to end the arrangement
- The partnership was intended to complete a particular task that is now complete
- The partnership agreement outlined an event that would end the partnership, and that event has now happened
How To Dissolve a Partnership
Whether yours is a limited partnership, general partnership, or limited liability partnership, the basic process for dissolving it is the same. We have outlined the process below, but you should speak with an experienced business lawyer before taking any of these steps:
- Review Your Partnership Agreement: In particular, look for a partnership dissolution clause or terms of dissolution. If your agreement includes this, it will outline what you need to do next.
- Speak With Your Partners: Notify them that you will apply for the dissolution of the partnership.
- File a Partnership Dissolution Form With the State: You will need to state the reason for the dissolution in this paperwork.
- Wind up Your Business: After the dissolution is approved, you will need to finish existing contracts, notify government agencies like the IRS, and tell employees and landlords.
Dissolving a Business Partnership Alone Is Risky
You can dissolve a business partnership on your own in Virginia. But doing so can put you at financial risk, particularly if the other partners do not want what you want. They may try to take advantage of any ambiguity in your partnership agreement to make this process more difficult for you.
For example, when you are wrapping up your business and selling the partnership’s assets, you will want your fair share. But a savvy and upset ex-partner could try to keep you from getting what you are owed. Alternatively, a partner who has exposed your partnership to legal liability could try to point the blame at you.
This is why so many Virginia business owners use a qualified and experienced business lawyer when they want to dissolve a partnership.
Let Copenhaver, Ellett & Derrico Help
A Roanoke business attorney with our firm can help with every step of dissolving your partnership. From reviewing the partnership agreement and keeping you informed to protecting your assets and fighting for you in court if it comes to that, Copenhaver, Ellett & Derrico has you covered.